Avoiding Piercing The Corporate Veil Lawyer
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Why Would You Need to Pierce the Corporate Veil?
A limited liability corporation (LLC) has many benefits for its owners, who are also known as "members." One advantage is that the owner is immune from being sued by creditors for the LLC’s unpaid debts. However, if the LLC can no longer pay its bills, creditors may try to pierce the corporate veil to go after the LLC’s owners.
What is Piercing the Corporate Veil?
Piercing the corporate veil refers to a court declaring an LLC a sham. This declaration is the first step in stripping the company of its LLC protected status.
What Will Happen If the Court Take Away the LLC Status of My Company?
The LLC’s creditors will have the legal right to sue any:
- Board members
Are There Things I Can Do to Avoid a Court Piercing the Corporate Veil?
Yes, an owner, director, or stockholder can avoid doing the following:
- Not commingling personal assets with LLC assets
- Not diverting LLC assets into personal accounts
- Not using the LLC’s money for personal use
- Never personally guarantee a creditor payment for any of the LLC’s debts
What Should I Do to Keep My Company’s LLC Status?
An owner, stockholder, or director can do the following to keep the LLC status:
- Make a reasonable first investment in the LLC so it’s capitalized adequately
- Make it clear to creditors, business, and customers the business is an LLC.
- Maintaining separate personal and LLC bank accounts
- Following formal rules for both starting and maintaining an LLC
Can I Still be Sued for My LLC’s Debt?
Owners, stockholders, and directors can be sued for the debts of the LLC, but that does not mean the creditor will win.
Can a Business Lawyer Help Me Avoid the Piercing of the Corporate Veil?
Yes. A business lawyer will work with you to keep your limited liability status.
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Last Modified: 03-17-2016 05:07 PM PDT
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