Cathy, an electrical contractor, sets up a corporation in which she is the sole stockholder and president.

Cathy, an electrical contractor, sets up a corporation in which she is the sole stockholder and president. Her husband, Claude, is the secretary and both she and her husband serve on the corporation's board of directors as its only two members. Cathy, who was a sole proprietor before incorporating her company, continues to run her business exactly as before. She pays company debts out of her personal checking account and deposits all checks payable to the company in her personal checking account. In addition, she does not consult her husband on any business decisions or hold regular meetings of the board of directors. She does, however, hold yearly stockholder's meetings and votes to re-elect herself and her husband as directors; her husband dutifully records the minutes of these meetings.