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Corporations - Liabilites - Inadequate Capitalization As Ground For Disregarding Corporate Entity, Lewis L. Clum

Michigan Law Review

Defendant Resnick, meeting minimum statutory incorporation requirements, organized a corporation and thereafter persuaded defendants Cowan to join him in operating a used car enterprise under the corporate name. No stock was issued, nor capital paid in, although a checking account was opened for use by the business. Car purchases were financed through loans made or guaranteed by the elder Cowan, who held title until resale. Proceeds from resale transactions were deposited in the checking account, from which defendant Resnick reimbursed Cowan for money advanced. Sales volume averaged from $100,000 to $150,000 monthly. Assured that the elder Cowan was "backing" the …