Ridley is setting up a new architectural lighting company and is acting as the promoter of the as yet unincorporated business. She needs to order some specialized equipment in order to get started. She orders the equipment, which is financed in the name of the business. The corporation will be liable for paying for this equipment because Ridley is its agent.

Question

Ridley is setting up a new architectural lighting company and is acting as the promoter of the  as yet unincorporated business.  She needs to order some specialized equipment in order to get started.  She orders the equipment, which is financed in the name of the business.  The corporation will be liable for paying for this equipment because Ridley is its agent.

Quizplus · Accepted Answer

Until the corporation is legally formed and exists as an entity, it cannot be bound by contracts or incur liabilities. Ridley, as the promoter, would personally be liable for any contracts she enters into on behalf of the not-yet-existent corporation.

Ridley Is Setting Up a New Architectural Lighting Company and Is