Piercing the Corporate Veil

The following steps should be taken to avoid having an attorney pierce your corporate veil. This is important to follow. In one of the seminars that I went to with Matt Atkinson there was an attorney there who said the biggest things he looks for when he is suing a company for damages/losses is to try and pierce the corporate veil and he was very convincing and had obviously had success at doing it since he was very adamant in what he was explaining to us. The number one thing he mentioned he uses to do that is commingling of funds. So the list goes like this:


· Never commingle personal and corporate funds or other assets.

· Do not divert corporat funds or assets to other than corporate uses.

· Do not treat corporate assets as if they were your own.

· Whenever you are going to subscribe to or issue more stock, always get proper authorization by holding a special meeting of the directors (which can be just one person).

· Never assert that shareholers are personally liable for corporate debts (personal guarantee).

· Maintain and update corporate records (annual meeting minutes, resolutions).

· To avoid confusion over which entity entered into a transaction, keep separate records for each business you own.

· Avoid identical equitable ownership in two corporations (control group issue).

· If you have more than one corporation:

o Avoid the appearance of total domination and control over both,

o Elect separate officers and directors,

o Use different offices and business locations

o Hire different employees and legal counsel

· Make sure you have enough capital and insurance to deal with any potential liability.

· Have a real business purpose

· Never conceal or misrepresent the corporation’s owners, management or financial interests.

· Adhere to all legal formalities and make sure all transactions between related parties are at arm’s length.

· Never use the corporation as a shield when contracting with others if the intent is to avoid performance or to commit illegal transactions

· Never use the corporation to avoid an existing liability for yourself or another entity.

· Keep the corporation in good standing by complying with annual state filing requirements.

All of these things need to be followed if you are to use a corporation for your business and if you want to avoid having your corporate veil being pierced.