Which Statement Best Describes the Circumstances in Which a Court

question 32

Multiple Choice

Which statement best describes the circumstances in which a court will disregard the separate existence of a corporation and impose liability on a shareholder for obligations owed by the corporation to a creditor? A court will impose liability on a shareholder

• A) when a business has been incorporated to do something or facilitate the doing of something which is illegal or improper, like fraud.
• B) when a corporation does not have sufficient assets to meet its reasonably foreseeable liabilities resulting from carrying on its business.
• C) when the creditor is an individual who really needs the money and imposing liability on the shareholder is the only way to ensure that the individual obtains relief.
• D) when the corporation has breached its contract with the creditor.
• E) in no circumstances.

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Definitions:

Financial Statements

Formal records of the financial activities and position of a business, person, or other entity, usually comprising the balance sheet, income statement, and cash flow statement.

Profit Margin

Profit Margin is a financial metric that measures the percentage of revenue remaining after all expenses have been deducted from sales.

Net Income

The total earnings of a company after all expenses and taxes have been deducted from total revenue, indicating the company’s profitability.

Net Sales

The net income from goods or services sold, after deducting returns, allowances, and discounts.