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The term alter-ego in the business vocabulary is a term to determine wither a business and a person are one in the same. A corporation has liability protection where the shareholders or owner’s assets cannot be taken as collateral if the company cannot pay its debts. But this is not always true. The corporate shield can be pierced if certain basic corporation rules are not followed. One being that the corporation has to act as a separate from the shareholders “A corporation must be an entity separate and independent from its shareholders”. Also the company has to do things that a company would do such as hold meeting. “Stock certificates must be issued, directors elected and officers appointed; meetings must be held, resolutions must be passed, and corporate books and records must be kept.”
A case that involves the alter-ego liability is WELLS FARGO BANK, NATIONAL ASSOCIATION, Plaintiff and Respondent, v. Steven J. WEINBERG, This case involves Mr. Weinberg who had a professional law business. He and his wife claimed that they loaned the company money and that they paid themselves before the company closed and that the company could not pay the bank Wells Fargo back its loan. But Mr. Weinberg continued practicing law under a new business name. “Wells Fargo asserted that Weinberg had drained the assets of the law corporation before dissolving it in June 2009. Then, under the name of “Steven J. Weinberg a Trial Lawyer,” he continued to practice law at the same location as Steven J. Weinberg, a professional law corporation.” (WELLS FARGO BANK, NATIONAL ASSOCIATION, Plaintiff and Respondent, v. Steven J. WEINBERG) Wells Fargo was right on this case and this is what the judgement found “After reviewing the evidence and Weinberg’s demeanor, the trial court held that there was sufficient evidence that Weinberg had failed to observe corporate formalities and to keep his personal and business expenses and funds separate and that Weinberg had controlled the law corporation. Viewing this evidence favorably to Wells Fargo, the judgment must be affirmed.” (WELLS FARGO BANK, NATIONAL ASSOCIATION, Plaintiff and Respondent, v. Steven J. WEINBERG) This case is a great example of the alter-ego liability,
I do not think it is ethical for a company to move its corporate headquarters overseas in order to avoid paying income tax. I agree with Bob McIntyre and his comments in the Washington post article
“Stashing money offshore to avoid U.S. taxes is hardly a victimless crime,” said Bob McIntyre, director of Citizens for Tax Justice. “Every dollar shifted to an offshore tax haven means less federal revenue to pay for the infrastructure, education and other public services that help our economy grow.” (Merle, 2016)
The question of who the company has a duty to pay the government or the shareholders and I think that the answer is both. Without the setup of the Government and it being the frame work in which entrepreneurs can grow a business from the bottom up. And with without the shareholder’s investments a company cannot grow. Companies that start up in the U. S. and take advantage of the infrastructure and the economy should feel a since of duty to pay into that system. I think there needs to be some type of agreement that will keep business here in the U.S I would rather a smaller percentage of more companies than no percentage from a few.
Merle, R. (2016, March 4). How U.S. companies are avoiding $695 billion in taxes. Retrieved from https://www.washingtonpost.com/news/business/wp/2016/03/04/why-u-s-companies-wont-bring-2-4-trillion-in-foreign-profits-back-home/
Maffei, S. (2011). Personal Liability of Corporate Shareholders in New York. Review Of Business, 31(2), 110-114.
WELLS FARGO BANK, NATIONAL ASSOCIATION, Plaintiff and Respondent, v. Steven J. WEINBERG, Defendant and Appellant.E057011 Decided: May 28, 2014 FindLaw’s California Court of Appeal case and opinions. (n.d.). Retrieved from http://caselaw.findlaw.com/ca-court-of-appeal/1670226.html
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