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Law Pro
Law Pro, Attorney
Category: Business Law
Satisfied Customers: 24869
Experience:  20 years experience in business law - sole proprietor, partnership, and corporations
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Tom inherited his fathers landscaping business, and incorporated

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Tom inherited his father's landscaping business, and incorporated the business after he read an article in Lawn News, advising landscaping businesses to incorporate. Tom has been sued by a customer, whose prize rose bushes were accidentally damaged by a landscaper. Tom called his attorney, Hector, to represent him in the lawsuit. When Hector asked for the corporate minutes, Tom said, "What corporate minutes?" Hector advised Tom that his personal assets could be taken if he lost the suit, but Tom said, "No, don't worry! I'm a corporation; I have no personal liability!" Is Tom correct? Identify and discuss the legal principle that would be applied by a court to resolve this issue, and predict the outcome of the suit against Tom.
Submitted: 6 years ago.
Category: Business Law
Expert:  Law Pro replied 6 years ago.

No, Tom is incorrect. They can very much "pierce the corporate veil" if he hasn't followed the mandated corporate formalities. Too, the corporate veil can also be pierced when the corporation is under capitalized - that means basically they don't have insurance and/or can't pay for their negligence.


Predicting the outcome in this instance would be relatively simple - they would allow the piercing of the corporate veil based upon a number of issues - lack of following the corporate formalities AND lack of adequate capitalization.

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