Case that involves alter-ego liability
Using findlaw.com, (http://caselaw.findlaw.com/) research a case that involves alter-ego liability. In 250 words, define the term “alter-ego” and list the elements the court considered when determining whether to pierce the corporate shield. Incorporate the material from the required readings and support your statements.
In addition, discuss whether it is ethical for a company to move its corporate headquarters overseas to avoid paying income tax. Which duty do you believe is higher, the duty of corporations to pay tax to government or the duty of corporations to pay dividends to shareholders? Why?
Alter-ego exists when there is no clear separation between the identity of an individual and the corporation. If the owner carries out his duties in the business totally separate from his personal assets then each will be recognized as a separate entity. If there is no clear separation between the two then there is no basis for limited liability for the individual which means that the individual will be liable for all the business debts.
In a labor dispute, the labor law uses the alter ego doctrine in order to determine whether to lift or pierce the “corporate veil.”
In the case RESILIENT FLOOR COVERING PENSION FUND v. INSTALLATION INC the district court had to conduct 2 alter ego tests that requires proof (1)(Nor-Cal test) that the two firms have “common ownership, management, operations, and labor relations,” (2) “whether recognizing the separateness of the two employers undermines the purposes of ERISA and the MPAA.”
Is it ethical for a company to move its corporate headquarters overseas to avoid paying income tax?
In my opinion, the law allows a company to move its corporate headquarters anywhere in the world so I think they can do as they please. Whatever the reason may be for the move, at the end of the day it’s a business and a business needs to make money with the least amount of expenditures so if moving the company will save them a huge amount from income tax payment then it’s a smart business move.
Which duty do you believe is higher, the duty of corporations to pay tax to government or the duty of corporations to pay dividends to shareholders? Why?
I believe that they’re both equally important. By law you have to pay the government taxes or there will be criminal consequences which means you would lose more money in the end if the corporation evades taxes. At the same time shareholders are also entitled to the dividends that they have earned through their invested money to the company.