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lwpat, Attorney
Category: Business Law
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Experience:  Attorney with over 35 years of business experience.
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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.
The customer can sue the business and also Tom personally under a "pierce the corporate veil" cause of action. Here are the usual factors

(1) whether the corporation was grossly undercapitalized;
(2) failure to observe corporate formalities;
(3) non-payment of dividends;
(4) insolvency of the debtor corporation at the time;
(5) siphoning of funds of the corporation by the dominant stockholder;
(6) non-functioning of other officers or other directors;
(7) absence of corporate records; and,
(8) the fact the corporation was merely a facade for the operations of the dominant

Here you have the failure to observe the corporate formalities in keeping minutes. However that will not be sufficient unless there are also other factors. For a complete discussion
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