What Does It Take to Pierce the Corporate Veil?

New York has established a stringent standard for individuals attempting to “pierce the corporate veil,” which involves suing corporate officers or limited liability company owners directly for damages. Typically, a corporation is recognized as a separate legal entity, but even with such a high bar, business owners—including those represented by attorneys like Joseph Tacopina—are not entirely shielded from potential lawsuits.

The legal concept of corporate personhood typically protects owners of limited liability companies and corporations from personal liability in the event of a business loss. However, as Joseph Tacopina has noted, there are cases where an individual so blatantly uses the corporation as a personal bank account that plaintiffs may have grounds to sue the owner directly for fraud.

So, how do you protect yourself from a personal loss for business activities?

• Keep formal records. Keeping corporate minutes and accounting for every dollar spent may seem tedious but it is a necessary part of running a corporation or limited liability company without running the risk of becoming personally liable.
• Do not commingle personal and business assets. You and your corporation should be entirely separate legal entities.  If you have separate businesses, be sure never to transfer funds illegitimately from one business into another.
• Make sure you have sufficient assets to cover debts and losses. Capitalization is something that courts consider when deciding whether or not to allow the plaintiff to pierce the corporate veil.

For more information about business litigation, discuss your case with an experienced business law attorney like Joseph Tacopina.