Articles Tagged with Piercing the corporate veil

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AdobeStock_183215665-300x158A corporation is a legal entity that grants its shareholders and directors certain legal protections. While these members are generally protected from the debts of a business, it is not always the case. A plaintiff can “pierce the corporate veil” in certain situations, meaning that the court will hold the shareholder or director personally liable for the debts of the business. It also means that your personal assets can be used to satisfy business debts. Learn more about “piercing the corporate veil” – and what a corporate lawyer can do to help minimize your risk of liability.

What Is “Piercing the Corporate Veil?”

In common law, corporations have provided legal protections for their shareholders and directors. Shareholders and directors are not generally held personally liable for the debts of their business. In some limited circumstances, however, it might be possible to “pierce the corporate veil” of legal protection and hold them personally liable for corporate debts. Doing so allows plaintiffs to access the personal assets of shareholders and directors to satisfy the debts of the business.

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AdobeStock_273884130-300x200“Piercing the corporate veil” is a legal colloquialism used to describe the removal of corporate entity protection to hold shareholders or directors personally liable for corporate debts and liabilities. Limited corporate liability in California, whether through a limited liability company, limited liability partnership, or corporation, is the foundation of the corporate form. Closed corporations are the most susceptible to veil piercing, but corporate protections are difficult to remove absent illegality or serious corporate misconduct.

The Presumption of Limited Liability

Anytime damages are sought directly from a corporate subsidiary, parent company, shareholder, or director, California presumes corporate protection. The plaintiff must overcome this presumption based on the facts of each case. This can be done in two ways:

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