Question

Jake was the owner of Top Flight Furnishings, Inc., a small corporation. Jake is the CEO, and there are no other officers. Jake used the company’s bank account as his own, used the company’s cars, and regularly took home furnishings from the store. Jake also failed to maintain liability insurance on the business. After several accidents where chair legs bought at Top Flight were falling off and causing injuries to customers, a group of customers sued the company. However, because Jake had been spending all the company’s money and had let its insurance policy lapse, the business was broke, and the customers wanted to hold Jake personally liable. Jake argues that because the business is a corporation, the liability lies with the corporation, not with him. Who is correct, Jake or the customers? Why or why not?

Answer 1

As Jake is a CEO and is responsible for the business dealings and other functions of the business , he can be held personally liable for the company's failure and can be sued .He will have to pay for the loss and can also be punished for the failure and his part in it. Hence the customers are correct to hold him liable.