Corporate Formation and Financing

What does it mean to disregard the corporate entity

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What does it mean to disregard the corporate entity (piercing the corporate  veil)? Piercing the Corporate Veil. In certain situations, courts will “pierce the corporate veil” and hold shareholders  personally liable in the interests of justice and fairness. Factors  a court considers:  3 rd  party tricked into dealing with a corporation rather than the individual.  
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Corporation is set up never to make a profit or remain insolvent or is  undercapitalized. Corporation is formed to evade an existing legal obligation. Statutory formalities are not followed.  Know the difference between stocks and bonds Bonds. Issued by business firms and government at all levels. Normally have a  maturity date  – when principal is returned to investor. Sometimes referred to as fixed-income securities, because bondholders receive  fixed-dollar interest payments. Bond indenture : lending agreement Stocks. Common Stock : represents true ownership of a corporation.  Provides pro-rata (proportional) ownership interest reflected in voting, control,  earnings and assets. Investors who assume a residual financing position (whatever is left may go to  dividends to shareholders). 
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