Personal Assets and Piercing the Corporate Veil
A benefit of a Limited Liability Company (LLC) is the personal liability protection the entity provides members and managers. Quite often, if the LLC is sued, not only will the plaintiff try and attack the assets of the defendant LLC, but also the assets of its managers and/or member owners. The legal term for attaching personal liability to an LLC’s members and/or managers for corporate debts, is “piercing the corporate veil”. Therefore, once the corporate veil is pierced, the plaintiff creditor can go after the owner’s home, bank accounts, investments and assets.
A court uses this basic formula and examines many factors in determining whether or not to allow the creditor to “pierce the corporate veil”. The formula is as follows: Unity of Interest + Fraud or Injustice = Pierce the Corporate Veil. Since the test has two parts, to be successful, a plaintiff creditor must prove both parts.
Following is a list of LLC business formalities that you should adopt or adapt to your business practices. If you consistently adhere to these formalities, you will prevent your business from becoming an “alter ego” of yourself. You should answer, “Yes.” to every question. If you answer “No.” to a question, you should consider modifying that business practice.
For more information on LLCs and best business practices, contact my office. Phone: firstname.lastname@example.org for a free consultation.or email me at
This article is for informational purposes only and does not constitute legal advice about your case or situation. There may be exceptions to the information outlined above. Please consult an attorney if you have specific questions about your LLC and best business practices.