In November of 2018, Susan and Sharon decided to open a copy shop called "Copies R' Us". Susan and Sharon equally fronted the capital necessary for startup. The two agreed that Susan would learn how to run the equipment and would manage the store while Sharon would be responsible for soliciting and maintaining corporate accounts.

During the first year, the company was very successful and had a year-end net profit of $3,000,000. Because of their hard work, Sharon and Susan paid themselves a year-end bonus of $1,500,000 each. Leaving the company with value in goodwill and equipment but no cash reserves.

In January 2019, Susan and Sharon decided to incorporate their business under the name "Copies R' Us, Inc." They hired a lawyer to incorporate the business and were told by the lawyer that the business was incorporated. However, unknown to Susan and Sharon, their lawyer was old and not up to date on the latest law. The lawyer missed a change in the law that required cash reserves of a corporation to be no less than 20% of their average annual net profit. As Susan and Sharon had taken out all the cash a few days earlier, the corporation was not officially recognized by the State.

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, the 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 to 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 company's 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 didn't want to rebuild, that they'd 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 union's recourse against Copies R' Us Inc., Susan and/or Sharon? Explain your answers in detail, identifying the law that applies, and giving your legal reasoning.