You Have Limited Liability – Don’t Lose It. Avoid Piercing the Corporate Veil

One of the main reasons to form a limited liability entity or a corporationis to avoid personal liability. When you follow all of the corporate formalities in forming a limited liability entity or corporation, you receive the benefit of limited liability. This means that you have limited personal liability for the company’s debts or other liabilities. However, for every rule there is an exception. In this case, owners, shareholders, or members of a limited liability entity or corporation can be held personally liable if a piercing of the corporate veil occurs.

The corporate veil acts as a protection because a limited liability entity or corporation is considered a separate entity. However, courts can pierce that veil if there are factors like undercapitalization at the time of the formation of the entity, failure to adopt or follow the operating agreement or bylaws, comingling of personal and corporate assets, lack of accounting, or fraudulent business practices.
Here at Chauvel & Glatt, we understand that you formed a limited liability entity or corporation so that you could operate your business without fear that your personal assets would be at risk. Don’t lose that protection because you or your employees failed to understand the corporate formalities required in the formation and maintenance of your business. To learn how our attorneys can help you and your business, contact us today.

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