Reference no: EM133192446 , Length: 1 page

Question: Shareholders usually enjoy protections from liabilities of the torts occasioned by the employees. They are immune from liability. This applies to all forms of corporations including S corporations. Nonetheless, under some circumstances, the protection from liabilities is disregarded. Under the theory or principle of Piercing the Corporate Veil, shareholders are held personally liable for the torts committed by the employees (Mann & Roberts, 2018). The theory requires courts to pierce the corporate veil and hold the shareholders liable. This is because they have misused the corporate privilege that held them immune from liabilities. Under this theory, in an S corporation, a sole shareholder should not be able to avoid liability for the tort of the employees (Mann & Roberts, 2018). This is because the abuse of corporate privilege has happened for the personal benefit of the shareholders. Essentially, S corporations with a sole shareholder are indistinguishable from the shareholder (Mann & Roberts, 2018). Considering this, the shareholder cannot be treated separately from the corporation's operations. The Chickasaw Club, Inc.'s operations were an abuse of corporate privilege and power. Under the doctrine of Piercing the Corporate Veil, William Sharp would be held liable for the failure of employees to check Pursley's age. He would be liable for their actions of selling her alcohol that made her highly intoxicated leading to the accident. Indeed, their actions happened for the benefit of Sharp. This is evident because, among other things, Sharp paid his personal expenses from the corporate funds. He maintained the corporation's checking account. Chickasaw Club, Inc. operates as a private entity.

When the employees' tort is for the benefit of the shareholders, it would be an injustice for the shareholders to avoid liability (Mann & Roberts, 2018). In S corporations, there is only one shareholder. That shareholder should be held liable for the torts of employees.