For the next year, Susan and Sharon went about operating their business. Susan and Sharon paid themselves healthy salaries and gave themselves significant dividends at the end of each quarter. Susan and Sharon would meet to discuss business frequently but never once held a formal board or shareholders meeting.

In February 2020, business started to slow, and Susan and Sharon decided to take a loan to help cover overhead. Susan went to her local credit union and took out an unsecured $2,000,000 business loan in the name of Copies R Us, Inc. The bank asked for a copy of the formal incorporation documents. Susan wrote the Secretary of State office and requested a copy of the document. She received a notice back that the request had been received but that it would take 3 to 6 months to process the request. Susan provided a copy of the notice to the bank. Based on the companys Profit/Loss statement and the letter from the State, the bank issued the loan. Only Susan signed the loan as an officer of the company.

In April 2020, a copier caught fire and the business burned to the ground. Susan and Sharon had taken out an insurance policy in their individual names when they first opened the business and never changed the insured payee on the policy to the corporation. The insurance company paid out the $1,000,000 loss directly to Susan and Sharon. The two decided they didnt want to rebuild, that theyd made enough money and decided to retire. They put none of the insurance money back into the company.

Copies R Us, Inc. paid off what debt it could from current assets, but a balance of $1,500,000 was still left owing to State Bank.

What type of business entities did Susan and Sharon have throughout the history of the company? What is the credit unions recourse against Copies R Us Inc., Susan and/or Sharon? Discuss your answer in detail, identifying the law that applies, and giving your legal reasoning.