In the early 1970s, Justine Lyons opened an account at J & J Wholesale Florist,
ID: 2448077 • Letter: I
Question
In the early 1970s, Justine Lyons opened an account at J & J Wholesale Florist, Inc., to purchase flowers and florist supplies for her flower shop, called Bay Sweet Flower Shop, which she operated as a sole proprietorship. In 1983, the flower shop was incorporated as Bay Sweet Flower Shop, Inc. Lyons continued to order supplies from J & J, as did her son when he began to manage the day-to-day operations of the shop during the 1980s. J & J, which had no knowledge that Bay Sweet was now a corporation, sued Lyons and her son personally to recover a balance owing on the Bay Sweet account (for purchases made after Bay Sweet had incorporated). Is the fact that J & J was never informed of the subsequent incorporation of the Bay Sweet Flower Shop a sufficient ground for piercing the corporate veil and holding Lyons and her son personally liable for the debt? Explain.
Explanation / Answer
NO THE FACT THAT J&J WAS NEVER INFORMED OF THE SUBSEQUENT INCORPORATION OF THE BAY SWEET FLOWER SHOP IS NOT A SUFFICIENT GROUND FOR PIERCING THE CORPORATE VEIL AND HOLDING LYONS AND HER SON PERSONALLY LIABLE FOR THE DEBT.PIERCING OF CORPORATE VEIL OF LIFTING OF CORPORATE VEIL IS A LEGAL DECISION TO TREAT THE RIGHTS OR DUTIED OF A CORPORATION AS THE RIGHTS OR LIABILITIES OF ITS SHAREHOLDERS.USUALLY A CORPORATION IS TREATED AS A SEPARATE LEGAL PERSON WHICH IS SOLELY RESPONSIBLE FOR THE DEBTS IT INCURS.
GROUNDS FOR PIERCING CORPORATE VEIL ARE:
J&J NEED NOT BE INFORMED THAT OF THE SUBSEQUENT INCORPORATION OF THE BAY SWEET FLOWER SHOP AND NOT INFORMING IS NOT A GROUND FOR PIERCING CORPORATE VEIL.