Cathy, an electrical contractor, sets up a corporation ("EELectric Inc.") in which she is the sole stockholder and president. Her husband, Claude, is the secretary and both she and her husband serve on the corporation's board of directors as its only two members. Cathy, who was a sole proprietor before incorporating her company, continues to run her business exactly as before. She pays company debts out of her personal checking account and deposits all checks payable to the company in her personal checking account. In addition, she does not consult her husband on any business decisions or hold regular meetings of the board of directors. She does, however, vote to re-elect herself and her husband as directors. If EELectric cannot pay its existing obligations, is Cathy at risk that her personal assets might not be sheltered from personal liability from these debts of the corporation?

Answer rating: 100% (QA)

Even though Cathy is acting as a sole proprietor of ... View the full answer