Is it ethical for an owner to use the corporate entity to avoid personal obligation for business debts? Why or why not?
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A corporation is a legal construct with an identity separate and apart from its owner(s). A primary legal advantage to converting one’s business from an unincorporated enterprise to a corporate form is the ability to avoid personal liability for the business’s financial obligations. Since the corporation is legally distinguishable from its owner, the owner’s personal assets cannot be seized to satisfy the business’s indebtedness. These facts effectively mean that an owner can “crash and burn” a corporation financially, bankrupt the business, and walk away from the “flaming wreckage” of the corporation without personal obligation for business debts.
Is it ethical for an owner to use the corporate entity to avoid personal obligation for business debts? Why or why not?
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