State true or false and justify your answer: Creditors can sue a corporation as a legal entity but cannot sue the stockholders as individuals

Business Dec 25, 2020

State true or false and justify your answer:

Creditors can sue a corporation as a legal entity but cannot sue the stockholders as individuals.

Expert Solution

True.

Creditors can sue a corporation as a legal entity but cannot sue the stockholders as individuals.

The creditors cannot sue stockholders as individuals because when entering an agreement, the creditor does not get involved with the individual stockholders but with the corporation. A corporation is legally independent and not tied to the individuals holding shares in it; hence, any legal measures taken against the corporation are not against an individual or a group of individuals in the corporation but the corporation as an entity.

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