Tallahassee Trial Lawyer > FAQS > Frequently Asked Questions
X
GO

Call us at (850) 386-5777

Wills & Probate

What is "piercing the corporate veil?"

Sometimes, courts allow injured or aggrieved plaintiffs to receive compensation from corporate officers, directors, or shareholders for damages rather than limiting their recovery to corporate resources. This procedure avoids the usual corporate immunity for organizational wrongdoing, and may be imposed in a variety of situations. The specific criteria for piercing the corporate veil vary somewhat from state to state and may include the following:

- If a business is indistinguishable from its owners in practical terms, courts will not allow owners to benefit from limited liability.

- Example: Sam’s Trucking Company and Sam share the same banking account. Sam signs business contracts in his own name. Sam may be liable for breaching a business contract because he and his company are legally indistinct.

- If a corporation is formed for fraudulent purposes, courts will allow recourse to the owner’s assets

- If a business fails to follow corporate formalities in areas such as record-keeping and decision-making procedures, a court may impose liability on the individuals controlling the business.

The potential for personal liability encourages businesses to observe legal requirements and to avoid damage to third parties.