View Full Version : Can I be the only stockholder in my corporation?

09-25-2005, 07:33 AM
Yes, a corporation can be formed with only one stockholder. However, corporate formalities, such as director and shareholder meetings, are still required in order to preserve the corporate form and prevent the stockholder from personal liability.

09-25-2005, 09:20 AM
it matters what type of corporation you are starting. Talk to an attorney, one would be very glad to help you out.

03-01-2006, 02:44 PM
One stockholder is very common for small corps, however that makes it quite easy to "pierce the corporate veil" and hold the stockholder accountable for the corporation'd debts and practices (since in effect they are the controlling party and the only party to benefit from the corporations activities).

03-05-2006, 12:12 PM
Does it change significantly if the business is organized as an LLC or are they held to the same standard?

03-05-2006, 12:55 PM
LLC have fewer requirements but have also been less thoroughly tested in the courts. In other words, the body of existing case law is much larger for corporations.

03-06-2006, 11:00 AM
Yep - basically if a lawyer can proove you are the company (i.e. the only owner and the main benefit gainer), they can pierce the veil.

03-07-2006, 10:00 AM
Steel, what you say is true and very relevant.

However, I would just add that it's not hard to maintain the integrity of a corporate entity when you are the single owner. In fact, it's easier in a way because you dont have to deal with any partners, etc. I own a one-person corp and with some diligence and research, I've learned how to keep it highly protected and difficult to pierce.

Even if a lawyer can prove that I am the only owner and beneficiary, they can't just break through. They would have to prove that the corporation is formed for 'covenience' and therefore serves no actual business function (besides that of reducing taxes or liabiliy to the owner). That is a simplistic explanation, but that's the general idea as it was explained to me by my attorney.[

Since my 1-person corp engages in real business activities that would be impractical to perform as a sole prop, it is protected. Such activities include entering into complex legal agreements, maintaining payroll, doing pro bono work as billable hours, obtaining credit, and carrying E&O insurance.

If you have a corp that you are just using to bill clients, etc, it can be broken more easily.

I am not a lawyer.

03-07-2006, 03:52 PM
That's true, generally and usually, but like anything done by lawyers, it can be broken or worked around.

Case in point:
I worked a case where a guy (licensed plumber) started a corp for his plumbing biz. He did everything by the books, and actually did use the corp as a plumbing company, licensed and everything.
He screwed up a job that cost his client a major contract (imagine if say McDonalds used you for every plumbing job in your state, and you hired someone that messed up so badly, McD's pulled their biz from you - that bad). The client sued him individually and the corporation (since he did the work himself, and the corporation was the responsible party). The client's lawyers were able to get all the burden of the corporation (also he dissolved it soon after the suit and said it was out of biz) onto him personally.
Thank goodness this is Texas where they cannot take your house, since he was found liable by the judge for his and his corporations actions.

After Enron, HealthSouth, and all the other corporate malfeasance problems, Judges and juries are having no problems shifting the blame and problems onto the officers and owners.

03-07-2006, 03:58 PM
Good posts! I see what you are saying, but malfeasance and negligence are special cases, really.

For balance, we should note that even in a corp that is held by many, a good lawyer might be able to break through based on such factors. Therefore, a single-person corp isn't really less safe than any other.

Interesting topic...

(now seriously, I am NOT a laywer!)