Huey,Dewey and Louie form a corporation.Each member has equal shares,and Huey is designated as the CEO.Dewey and Louis are not corporate officers.The company borrows $1,000,000 from the Bank of Donald.Within the year,the company goes broke and out of business,through no fault of the organization.The company has only about $100,000 of assets when the business goes under.How will the bank recover its money?

Question

Quizplus · Accepted Answer

As the corporation is a separate legal entity, the bank cannot go after individual shareholders for the additional $900,000. Therefore, the bank will recover the $100,000 in assets and take a loss on the remaining $900,000 balance. This is known as limited liability, which is a fundamental principle of modern corporate law.

Huey,Dewey and Louie Form a Corporation