When you create a coporation, you are creating a separate legal entity. That's one of the main reasons for incorporating a business in the first place.

Imagine you want to set up your own consultancy, Tablizer, Inc. You go get a lawyer (or however you want to do it), fill out all the paperwork, and you create your legally-registered corporation in whichever district you choose. You give the Tablizer, Inc company $50,000. You are now the sole proprietor of Tablizer, Inc. TI goes out and buys computers, does advertising, whatever. You get a client. You're going to do some work for them creating widgets to interface with their foobars. You do your work, they pay Tablizer, Inc $250,000. Except that your widgets completely break their foobars, and they want to get their money back. You say, "But I did the work, and I delivered my widgets to you. You can't have it."

So they sue you. But they can't sue *YOU*. They can only sue Tablizer, Inc. And through the company, your liability is limited by the assets of the company (say you spent all the original $50k and half of the money they paid you. All you've left now is $125k. Plus computers and other various and sundries worth $25k.) Insurance notwithstanding, the most they can sue you for is $150k. They can't go after your house. They can't take your car away. They can't get at your wife's personal investments.

That is one reason why corporations are created. Limitation of liability.

So, yes. Companies can be sued. I don't know that, in this case, "Arthur Andersen, Inc" can be sent to jail. But fines are highly likely.

Sorry. Been 8 years since I've taken any form of class anywhere close to relating to that.

Otherwise, it was close. I hope. :)

IANAL, etc.