When a court finds that the shareholders of a corporation are using the corporate structure to shield themselves from liability when acting for purely personal purposes, the court may disregard the corporate structure and impose personal liability on the shareholders treating them like partners. This is called:
A) cracking the corporate shell.
B) piercing the corporate veil.
C) breaking the corporate shield.
D) breaching the corporate defense.
E) rupturing the corporate law.

Question

Quizplus · Accepted Answer

When courts find that the corporate organization is being misused, the corporate entity can be disregarded. This has been called piercing the corporate veil. When this veil of protection has been pierced, the shareholders are treated like partners who have unlimited liability for their organization's debts.

When a Court Finds That the Shareholders of a Corporation