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Under what circumstances a court may hold shareholders liable for debt of a corporation?
Wiki User
∙ 15y ago
When they personally guarantee corporate obligations or the corporate veil is pierced as a result of the shareholders failing to recognize corporate formalities and treat corporate assets as their own.
Wiki User
∙ 15y ago
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What is the differences between sole proprietorship patnership and corporation?
* A sole proprietorship is a business consisting of one owner. That owner may be either an individual or a corporation. If the owner is an individual (who is also personally liable for all the debts of the business) and carries on business under a name other than his or her personal name, that name must be registered under The Business Names Registration Act. * A partnership is a business owned by one or more individuals or corporations (in any combination). Within a partnership, each partner is potentially liable for all debts of the partnership. If the partnership carries on business under a name, that name must be registered under The Business Names Registration Act. * A corporation is a legal entity that has a separate legal existence apart from its shareholders and directors. It is sometimes also referred to as a 'limited company'. Since it has a separate legal existence from its shareholders and directors, they are generally not personally liable for the debts of the corporation beyond the amount contributed. Although it is the shareholders which 'own' a corporation, it is the directors who manage the day-to-day operations.
How many judges in the Salomon v Salomon Co Pty Ltd 1897 AC 22 case?
As I recall from my days in law school, many many years ago, Old Man Saloman was in the shoe business. Britain enacted a statute providing for the incorporation of businesses. A corporation then had to have at least seven shareholders. Old Man Salomon formed a corporation, with all seven shareholders being members of his family. The business of the corporation eventually went under, leaving considerable unpaid debts. (I think that by the time the case got to court, Old Man Salomon had kicked the bucket.) The creditors argued in court that the shareholders should be liable for the debts of the corporation, because they were all related to Old Man Salomon, and that the corporation was set up a mere sham. The court held in favour of the shareholders, Old Man Salomon's relatives. The fact that the shareholders were all related to Old Man Salomon was irrelevant in determining that the corporation legitimately existed as a separate entity, and thus the individual shareholders were not held liable for the corporation's debts.
What do you mean by corporate veil?
A legal concept that separates the personality of a corporation from the personalities of its shareholders, and protects them from being personally liable for the company's debts and other obligations. This protection is not ironclad or impenetrable. Where a court determines that a company's business was not conducted in accordance with the provisions of corporate legislation (or that it was just a facade for illegal activities) it may hold the shareholders personally liable for the company's obligations under the legal concept of lifting the corporate veil.
When does a company become a corporation?
A company becomes a corporation if the owners choose for it to be so. The main advantage of a corporation over other forms of company is that the directors (owners) protect their assets from the company's creditors. They are only liable under most circumstances to lose the investment that they have put into the business. There are also personal tax benefits for the directors of corporations.
Who can own a s corporation?
An S corporation can be owned by any US citizen or resident who is a natural person or certain qualified entities (estate, trusts and non-profits). An S corporation is limited to a total of 100 shareholders under current law.
What is a corporation what are the advantages of the setting up a business as a corporation?
A corporation could also be a legal entity, organized under state laws, whose investors purchase shares of stock as evidence of ownership in it. the advantages of the corporation structure are as follows:Limited liability. The shareholders of a corporation are only liable up to the number of their investments. the corporate entity shields them from any more liability, so their personal assets are protected.Source of capital. A publicly-held corporation especially can raise substantial amounts by selling shares or issuing bonds.Ownership transfers. it isn't especially difficult for a shareholder to sell shares during an organization , though this is often often harder when the entity is privately-held.Perpetual life. there is no limit to the lifetime of a corporation , since ownership of it can undergo many generations of investors.Pass through. If the corporation is structured as an S corporation, profits and losses are skilled to the shareholders, so as that the corporation doesn't pay income taxes.
What S corporation rules of Internal Revenue Code subchapter s of chapter 1?
Some of the key rules for S corporations under the Internal Revenue Code include a limit of 100 shareholders, all shareholders must be U.S. citizens or residents, only one class of stock is allowed, and profits and losses are passed through to shareholders' personal tax returns. S corporations also have restrictions on who can be shareholders and how the company is structured.
Under what circumstances may the veil of incorporation be lifted and the share-holders held personally reliable for the company's obligation?
Under three circumstances, corporate veil can be lifted by court, One of them is as follows : 1. When no. of sharesholders in private ltd co. goes down below 2 and in the case of public limited co, when no. of shareholders goes down below 7, the court of law can lift the corporate veil and directors get liable for the entire debts of the the company in the case of winding up. Abhay Kumar Srivastava Pursuing CS (executive) 08650002400, dehradun
What is incorporated?
When a business is incorporated, that means that the business has been organized as an entity under state law. The incorporated business is separate and apart from its individual owners. As a separate entity, the people who deal with the business - customers, suppliers, lenders, etc... - can only look to the corporation to enforce any claims that they may have against the business. The owners (shareholders) of the business are not personally liable for the claims against the incorporated business.
Is there a liability risk for Parents of a 16 year old?
Absolutely. The parents of a minor can, under certain circumstances, be held liable for what that minor does. If the minor gets sued, you man also get sued.
What is the difference between preference shares and share premium?
Preference shares are paid to shareholders before common stock dividends are paid out. Share premium can not be distributed, however, but under certain circumstances can be reduced.
What is a substance that carries electricity under certain circumstances but not under other circumstances?
A substance that carries electricity under certain circumstances but not under others is called a semiconductor.
