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Corporate Law and Liability

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Questions and Answers

What is the primary purpose of a corporation's creation?

To protect the owners' personal assets

To circumvent laws and regulations

To create a charitable organization

To operate for profit and distribute earnings to shareholders (correct)

What is the term for the legal separation between a corporation and its owners?

Corporate veil (correct)

Separation of ownership

Corporate liability

Legal entity doctrine

In what circumstances may the corporate veil be pierced?

When the corporation is profitable

When the corporation is a non-stock entity

When the owners are not involved in the corporation's activities

In cases of fraud or mismanagement (correct)

What doctrine addresses circumstances when the separation between owners and the corporation should be disregarded?

<p>Alter ego doctrine (C)</p> Signup and view all the answers

What is the primary benefit of a corporation's legal entity status?

<p>Limited liability for owners (B)</p> Signup and view all the answers

Study Notes

Corporation Definition

A corporation is a legal entity created by law that has rights and liabilities separate from its owners.
It can be created to operate for profit, distributing earnings to shareholders, or as a non-stock entity for public good.

Corporate Veil

The corporate veil separates the corporation legally from its owners.
The veil can be pierced to assign liability to owners in cases of fraud.

Doctrines

Alter ego doctrine: addresses circumstances when the separation between owners and the corporation should be disregarded.
Trust fund doctrine: addresses circumstances when the separation between owners and the corporation should be disregarded.

Key Concept

A corporation is a legal entity with separate rights and liabilities from its owners.

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Description

This quiz covers the basics of corporations, including their legal status, rights, and liabilities. It also touches on the concept of the corporate veil and its limitations.