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Paper Topic:

liability of corporation vs personal liability

SITUATION

Assume for purposes of answering questions 4-11 that Joe and Marge form a corporation and that

each owns 50 of the corporate shares . Marge is the president and Chief Financial Officer and Joe is the

Secretary . Both are on the board of directors

Six months after the corporation is started , there was a cash flow problem and it is necessary for

Joe to lend 50 ,000 to the business to enable it to cover its operating expenses . Four months later they

hire , Helmut , as Vice President of Sales Marketing

p During the next few years , the business did well . Vircon , however , never obtained liability

insurance . Joe and Marge keep meticulous records of receipts and payments , but did not document

certain corporate transactions , such as salaries and shareholder meetings . In one year the corporation

paid six of Marge 's monthly mortgage payments because she was having severe personal financial

problems and also paid for her daughter 's college tuition for her first semester

A few months later , Marge wishes to obtain a personal loan from her bank for 100 ,000 , but

the bank requires someone to co-sign the note . Marge co-signed the note in the name of the corporation

and signs as the president . Later Marge defaults on the note , and the bank sues the corporation for

payment

10 . Is Vircon (corporate name ) liable to Marge 's bank for the 100 ,000 personal loan

ANSWER (only edit /correct this part

The general rule is that shareholders , board of directors , and corporate...

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