John and Jane operate J & J Flowers, Inc. The corporation was properly formed by their attorney Bob. Bob made sure that all of the documents were properly signed and filed, and that an organizational meeting was held at which time John and Jane each received their stock certificates. Bob died the next day. Over the next five years, J & J Flowers is not profitable and owes the following bills which it cannot pay: 1) $100,000 to Landlord for rent for the store, 2) $200,000 to Wholesale Flowers for flowers, and 3) $10,000 to GMC for van rental.

Discuss the consequences of each of the following acts:

John signs a lease for the flower shop’s store as John, Owner of J & J Flowers.

Jane, who is recently divorced, deposits her alimony check in the J & J Flowers, Inc. checking account and pays her personal bills out of that checking account.

John does not own a car, so he drives the J & J Flowers delivery van from his home to the store and then back home each night.

John and Jane over a five year period do not hold any shareholder or Board of Directors meetings.

Category: Essays