Delta’s $30,000 marketing loan
People carrying on a business as co-owners for profit ordinarily form a general partnership without filing articles or using that label. Ann, Bob, and Claire supplied capital, actively operated the shoe business, and divided profits equally. ABC was therefore a partnership before incorporation.
A partner is an agent for ordinary partnership business. Marketing a shoe business falls within that ordinary business, and Ann signed for ABC. The partnership is bound, and its general partners ordinarily bear joint and several personal liability for partnership obligations. Thus, Delta can look to ABC and the partners, subject to applicable rules governing collection from partners.
Later incorporation does not itself release this existing debt. A creditor’s agreement to substitute the corporation and release the original obligors—a novation—is not stated. The corporation might additionally become liable if it assumed the debt or adopted the agreement, but the facts do not establish that. The partners should not receive a discharge merely because they later chose a corporate form.
Echo’s $40,000 expansion loan
The Echo transaction occurred after valid incorporation. Ann signed in a disclosed representative capacity as president, and Bob and Claire approved the expansion. Those facts establish actual authority. ABC, Inc. is liable on the contract.
Officers, directors, and shareholders are not personally liable for an authorized corporate obligation solely because they hold those positions. No personal guaranty or separate undertaking is given. Accordingly, Ann, Bob, and Claire ordinarily are not personally responsible for Echo’s bill.
Big Shoe’s $50,000 inventory contract
The corporation’s liability does not turn solely on whether Ann consulted the other owners. Buying inventory is an ordinary transaction for a shoe company. Her position as president and the nature of the purchase support implied actual authority to conduct usual business. Even if an internal rule required additional approval, apparent authority can bind the corporation where its manifestations reasonably lead the supplier to believe the president may purchase inventory.
Ann signed as president, and nothing indicates that Big Shoe knew of a limitation or that this was an extraordinary transaction outside the corporation’s business. ABC, Inc. is therefore likely bound. If Ann truly lacked both actual and apparent authority, a separate implied-warranty-of-authority theory might arise against her, but that is an alternative rather than the strongest result on these facts.
Peter’s injury
Fred remains personally liable for his own negligent driving. An employer is also vicariously liable for an employee’s tort committed within the scope of employment. Picking up purchased inventory serves ABC, Inc.’s business, so the corporation is liable for Peter’s injury caused by Fred’s negligence.
Shareholders are not vicariously liable for every tort of a corporate employee. No facts establish negligent hiring, personal participation in the collision, or another direct tort by Ann, Bob, or Claire. Their ownership alone does not make them defendants responsible for Fred’s driving.
Disregarding the corporation
A court may disregard the corporate form where domination and misuse of the entity produce the required inequity. Here, valid formation, regular meetings, and observance of formalities support separate corporate status. A recession and inability to pay creditors are ordinary business risks; neither establishes commingling, fraud, diversion, or abuse. Without additional facts, veil piercing is weak. That conclusion protects the individuals from later corporate obligations while leaving their preincorporation partnership liability to Delta intact.