What is an Incorporated Entity? - Corporation Essay Example
Corporation veil is A legal concept that separates the personality of a corporation from the personalities of its shareholders, and protects them from being personally liable for the company’s debts and other obligations - What is an Incorporated Entity? introduction. This protection is not ironclad or impenetrable. Where a court determines that a company’s business was not conducted in accordance with the provisions of corporate legislation (or that it was just a facade for illegal activities) it may hold the shareholders personally liable for the company’s obligations under the legal concept of lifting the corporate veil.
As aforementioned, a company once incorporated becomes a legal personality or a juristic entity that has a separate and distinct identity from that of its owners or members, shareholder; and it’s further empowered with its own rights, duties and obligations, can sue and be sued in its own name, etc. The most important ingredient that flows from the separate legal personality clause is that of limited liability. It is aimed at giving investors minimum insurance in their business over their own private lives.
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Hence, the most a member in the company can lose is the amount paid for the shares themselves and thus the value of his/her investment. 9 Thus, creditors who have claims against the company may look only to the corporate assets for the satisfaction of their claims as creditors and generally cannot proceed against the personal or separate assets of the members. This has the potential effect of capping the investors’ risk whilst, consequently, their potential for gain is unlimited.