Legal 18.3

False

"Piercing the corporate veil" means revealing to shareholders the internal rules of corporate management.

False

A court will not pierce the corporate veil of a corporation that is formed merely to evade an existing legal obligation.

Albert may be liable for Best's debts under the alter-ego theory.

Albert owns Best Corporation. He completely dominates Best's operations, such that the company is not really operated as a separate legal entity. Which statement is correct?

piercing the corporate veil.

An action in which a court disregards the corporate entity and holds the shareholders personally liable for corporate debts and obligations is:

sometimes ignore the corporate structure and expose shareholders to personally liabilty.

Courts will:

shareholders may be personally liable for corporate debts.

If a court decides to pierce the corporate veil, the result is:

True

If shareholders of a close corporation continuously use corporate property for personal use, the shareholders risk being personally liable for debts of the corporation.

True

If shareholders of a close corporation do not follow the laws of the state regarding corporate formalities, the shareholders risk being personally liable for debts of the corporation.

The failure to hold corporate meetings is a factor considered in deciding whether to pierce the veil of Fritz Corporation.

Jack is the sole shareholder of Fritz Corporation. He ignores the recommendations of both the company's lawyer and accountant and fails to hold any corporate meetings. Which statement is correct?

the corporation was too thinly capatalized.

Mitch owns a corporation with his family. They have a lot of money and so agree that if the company has any losses, they will cover it, so they do not buy insurance. If a court pierces the corporate veil when the company loses a lawsuit, it is most likely because:

expose the shareholders to personal liabilty.

Piercing the corporate veil means that a court will ignore the corporate structure and:

commingling

Putting funds or goods together into one mass so that they are mixed to such a degree that they no longer have separate identities is called:

True

To pierce the corporate veil means to ignore the corporate structure, exposing the shareholders to personal liability.

Yes, because the judge would have grounds to pierce the corporate veil.

Tom and Sally operate a sky-diving business and decide to incorporate to avoid personal liability for any harm to clients. However, Tom and Sally give no assets to the corporation, keeping all of the equipment in their personal names and paying all business income to themselves as salaries. If a client is injured and sues, may the judge order Tom and Sally to pay the client with their personal assets?

All of these factors are considered: The corporation is formed to evade existing legal obligations, The corporation is set up to never make a profit, and A party is tricked or misled into dealing with the corporation rather than the individual.

Which factor is NOT considered when a court is deciding to pierce the corporate veil?