Once a corporation is recognized by the state,the corporation automatically becomes liable for all pre-incorporation contracts entered into by a promoter on behalf of the corporation.

Question

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Once a corporation is recognized by the state, it becomes a separate legal entity and is only liable for the contracts it enters into after incorporation. The promoter who entered into pre-incorporation contracts remains personally liable unless the corporation expressly assumes the contracts or the parties agree to release the promoter from liability.

Once a Corporation Is Recognized by the State,the Corporation Automatically