What is the main function of the "corporate veil"?

The main function of the "corporate veil" is to provide a legal distinction between the corporation as a separate entity and its shareholders. This distinction is crucial because it means that the liabilities and debts incurred by the corporation do not become the personal liabilities of the shareholders. Therefore, if the corporation faces a lawsuit or defaults on its obligations, the personal assets of the shareholders are generally protected from creditors. This concept promotes investment in corporations because individuals can participate without risking their personal finances beyond their investment in the company.

Incorporating this separation encourages entrepreneurship, as shareholders can feel secure that their personal assets will be safeguarded if the corporation faces financial difficulties. This principle is fundamental to corporate law and underpins the trust investors place in the corporate structure.

The other options do not accurately reflect the primary function of the corporate veil. While protecting corporate trademarks is important for intellectual property, it does not relate to the separation of liabilities. Regulating corporate taxation pertains to compliance and financial obligations, which is unrelated to the concept of the corporate veil. Enforcing shareholder agreements concerns the governance and rights of shareholders, rather than the protection of personal assets from corporate liabilities.