December 8, 2011
Elaine and Roy
Incorporating their home health agency gives them limited liability. The health care field has the potential for malpractice lawsuits, and this can bankrupt a small business. Elaine and Roy will not be personally responsible for the corporation’s debts or obligations. They will create a closely held corporation than may have themselves as shareholders versus a public corporation that would have thousands of shareholders.
The process of incorporating begins with choosing which state they will incorporate in. Once that decision is complete, Elaine and Roy will file an article of incorporation or corporate charter with the ...view middle of the document...
289). After their 10-year anniversary Elaine and Roy want to dissolve their corporation. This is called a voluntary dissolution and an article of dissolution must be filed with the secretary of state. At that point the corporation may not carry on business except to wind up and liquidate its assets and after completion they have terminated the corporation.
Tom may be correct. In his incorporation he would have had to adopt bylaws and there is no information to show if they included record keeping. We do know that a court of equity can use a doctrine known as piercing the corporate veil. Courts can apply this doctrine in cases in which the corporation has not kept separation between itself and the shareholders. By not keeping meeting records, Tom may have violated this separation. I predict that the court will side with the plaintiff and see Tom’s recordkeeping as an intentional act to hide behind the corporate veil. In the case of Northeast Iowa Ethanol, LLC v. Drizin (Cheeseman, 2010, p. 296) the courts looked at whether a corporation has enough funds to meet its debts or there is no separation to only benefit the shareholder. In these cases it may piece the corporate veil. If Tom’s company had sufficient funds to meet its debts then it could take care of the customer and avoid the lawsuit altogether. This combined with the lack of record keeping indicates that Tom is hiding behind the corporation.
Cheeseman, H. R. (2010). The legal environment of business and online commerce: Business
thics, e-commerce, regulatory, and international issues. (6th ed.) Upper Saddle River, NJ:
Pearson Prentice Hall.