Corporations 9

Question 1

Under some circumstances, the distinction between the entity and its owner may be disregarded.

What does this refer to?

Answer 1

Piercing the Corporate Veil

Question 2

Entity is a mere instrumentality or alter ego of its owner.

What does this refer to?

Answer 2

Piercing the Corporate Veil

Question 3

Factors to Consider:
1. Whether the corporation was adequately capitalized for the corporate undertaking (capitalized = you have enough money to do business)
2. Whether the corporation was solvent.
3. Whether dividends were paid
4. Whether corporate records were kept
5. Whether the officers and directors functioned properly
6. Whether other corporate formalities were observed
7. Whether the dominant shareholder (or member) siphoned corporate funds
8. Whether, in general, the corporation simply functioned as a façade for the dominant shareholder (or member). See NetJets Aviation, Inc, v. LHC Communications, LLC.

What does this refer too?

Answer 3

Piercing the Corporate Veil

Question 4

No single factor can justify a decision to disregard the corporate entity, but some combination of them is required, and an overall element of injustice or unfairness must always be present, as well.

What does this refer to?

Answer 4

Factors to Consider - under piercing the corporate veil

Question 5

When does it come up:
* Sometimes as a separate claim or theory for liability in the complaint (either when filed or amended after discovery).
* Sometimes as a post-judgment matter.

Answer 5

piercing the corporate veil

Question 6

What are the theories of piercing?
1.
2.
3.

Answer 6

1. The Sole Shareholder Theory
2. The Single Entity Theory
3. The Agency Theory

Question 7

Theory: When a corporation only has one shareholder, the distinction between the shareholder and the corporation is a mere fiction.

Answer 7

The Sole Shareholder Theory

Question 8

Theory: When a corporation only has one shareholder, the distinction between the shareholder and the corporation is a mere fiction.

BUT: The cardinal legal rule is that a corporation possess a legal existence separate and apart from that of its officers and shareholders, [and] the mere operation of corporate business does not render one personally liable for corporate act. Sole ownership of a corporation by one person or another corporation is not a factor, and neither is the fact that the sole owner uses and controls it to promote his ends. See Sorries v. Dancuse.

Answer 8

The Sole Shareholder Theory