Tony and Tim Are Shareholders of a Closely Held Corporation

question 83

Multiple Choice

Tony and Tim are shareholders of a closely held corporation that engages in illegal activity. They mixed business and corporate assets regularly. Do Tony and Tim have limited liability?

• A) Yes, because limited liability is absolute.
• B) Yes, because their corporation was closely held.
• C) Yes, because of corporation by estoppel.
• D) No, because closely held corporations never benefit from liability protection.
• E) No, because they used the corporation to engage in illegal and wrongful acts and because they comingled personal and corporate interests.

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Definitions:

Life Estate

A legal right to use and derive benefits from a property for the duration of one's life, after which the property passes to another designated person.

Will

A legal document in which a person specifies the method to be applied in the management and distribution of their estate after death.

Fee Simple

The highest level of property ownership where the owner has unrestricted rights to the property, capable of being inherited by legal heirs.

Reversionary Interest

The right of the original owner to retake possession of property upon the death of the life tenant.