PIERCING THE CORPORATE VEIL

What is the corporate veil?

A corporation is a standalone legal entity separate from its officers and owners. A corporation is liable for its own contracts, debts and torts. Shareholders and officers are usually protected from liability for the obligations of the corporation. However, when the corporate structure is abused courts can disregard the corporate form and impose individual liability. This is known as “piercing the corporate veil.”

While difficult to accomplish, piercing the corporate veil is a commonly litigated corporate law issue. Most attempts involve creditors and judgment holders seeking to set aside the corporate form to hold the owners or officers personally liable.

How do you pierce the corporate veil?

In order to pierce the corporate veil of a traditional corporation, the plaintiff must prove each of the following: (1) some frustration of contractual expectations regarding the party to whom he looked for performance; (2)  the flagrant disregard of corporate formalities by the defendant corporation and its principals; and, (3)  the existence of fraud or other equivalent misfeasance.

What about limited liability companies?

The same law applies to attempts to pierce the corporate veil of a limited liability company. However, the application of the law to LLCs will differ with respect to establishing a flagrant disregard of LLC formalities. This is because an LLC requires less formalities than does a corporation. So the traditional lack of corporate formalities will not necessarily evidence wrongful conduct.

Contact Us

The lawyers at Danks, Miller, & Cory, have experience representing business owners and officers against improper attempts to impose personal liability. We also have experience helping individuals and businesses pierce the veil to recover money owed.

To discuss one of our attorneys can assist you, contact us online or call our office locally at 601-957-3101.

Our office is conveniently located in downtown Jackson, just off I-55. Parking is available behind the building.