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  1. business
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  3. against corporate immunity for 3 or fewer sharehol

AGAINST CORPORATE IMMUNITY FOR 3 OR FEWER SHAREHOLDERS Corporations insulate shareholders/owners from personal liability; that...

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Accounting

AGAINST CORPORATE IMMUNITY FOR 3 OR FEWER SHAREHOLDERS

Corporations insulate shareholders/owners from personal liability; that is, shareholders can lose no more than their investment; however, whatever justification that there is for this doctrine, a corporation should not be able to shield its shareholders/owners from personal liability unless there are four or more shareholders. If there are fewer shareholders/owners than four, the same liability laws should apply that are applicable to partnerships (meaning shareholders could be personally liable if the business fails and the debts are greater than the remaining business assets).

OR SAID ANOTHER WAY: In a general partnership, each partner has unlimited personal liability. Partnership rules usually dictate that whatever debts are incurred by the business, it is the legal responsibility of all partners to pay them off. ... All partners are responsible for paying the debts.

OR ASKED STILL ANOTHER WAY: Is it good public policy to let Ma and Pa incorporate their grocery business (two stockholders) to protect themselves from business debts greater than the remaining assets. Present law allows for this, but is it good public policy.

Why is this not a good public policy?

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