BUS607 Week 1 Discussion 2 Personal Liability

What are the factors the court will consider in deciding whether or not to pierce the corporate veil?

1. Whether the company or LLC was engaged in fraud activities. 2. Whether the company or LLC failed to follow company procedures and formalities in its business activities. 3. Whether the company or LLC was inadequately capitalized If not, is it truly an independent entity?)  4. Whether one person or a small group of closely related personalities had full control of the company or LLC at the time of conducting business activities (Miller, 2014).

Should the court pierce the corporate veil? Why or why not?

In this scenario, Johnson Trucking Inc.’s failure to comply with corporate procedures and formalities related to undertaking its business activities has broken the corporate immunity. It is the responsibility of the corporation to notify the creditors of its intention to be dissolved or in a way of undertaking fundamental steps of business decisions. “If the assets of Company are liquidated without notice to parties having claims against the Company, the Company shareholders of the original company could be held personally liable for the liabilities,” (Miller 2014). Juice Express is not sold through Johnson Trucking Inc. has dissolved and was not given an opportunity to file a claim for payment of outstanding debts, leaving Pat liable for the amounts owed!

References

Miller, R. L. (2014). Business law: Text and cases - commercial law for accountants. Retrieved from https://www.redshelf.com