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Questions and Answers
What factors may lead to piercing the corporate veil?
What factors may lead to piercing the corporate veil?
- Commingling personal and corporate assets (correct)
- Filing annual reports with regulatory authorities
- Maintaining accurate financial records
- Holding regular board meetings
What is the primary purpose of piercing the corporate veil?
What is the primary purpose of piercing the corporate veil?
- To shield personal assets from business risks
- To minimize tax liabilities for corporations
- To prevent individuals from using a corporate entity to commit fraud or injustice (correct)
- To facilitate ease of business operations
What does 'piercing the corporate veil' refer to?
What does 'piercing the corporate veil' refer to?
- The protection of personal assets from business liabilities
- The legal action of holding individuals responsible for the actions of a corporation (correct)
- The process of incorporating a business entity
- The taxation of corporate profits
Flashcards
Piercing the corporate veil
Piercing the corporate veil
Holding individuals liable for a corporation's actions.
Primary purpose of piercing the corporate veil?
Primary purpose of piercing the corporate veil?
To stop people using a company to commit fraud or injustice.
Commingling assets
Commingling assets
Mixing personal and company assets together.
Study Notes
Piercing the Corporate Veil
- Piercing the corporate veil refers to a situation where a court holds a corporation's shareholders or owners personally responsible for the corporation's debts or liabilities, despite the limited liability nature of a corporation.
Factors that may Lead to Piercing the Corporate Veil
- Failure to maintain proper corporate formalities, such as holding annual meetings and recording minutes
- Comingling of personal and corporate funds
- Insufficient capitalization of the corporation
- Failure to maintain adequate corporate records
- Fraudulent or illegal corporate activities
Primary Purpose of Piercing the Corporate Veil
- To hold individuals accountable for their actions and prevent misuse of the corporate form to avoid personal liability
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