Carey decided to incorporate her business under the name yStar Inc.Before yStar was incorporated,Carey signed a contract in the name of yStar,Inc.to have some office space remodeled.Which statement is correct?

Question

Quizplus · Accepted Answer

A corporation is a separate legal entity from its owners, and is not liable for any obligations incurred prior to its incorporation. Therefore, yStar Inc. cannot be liable on the contract simply because it was signed in its name before the corporation was formed. The contractor may have a claim against Carey personally, but unless yStar Inc. adopts the contract (i.e. agrees to be bound by its terms), it will not be liable for the contractual obligations.

Carey Decided to Incorporate Her Business Under the Name YStar