Have you Heard of Piercing the Corporate Veil?

It sounds painful, and it is.  

Piercing the Veil is allowed when someone gets a judgment against a corporation or LLC (i.e., wins in court), finds the entity has no money to pay off the judgment, and then goes after the shareholders or members to get paid. Wait! You thought the entity protected you from personal liability. It does.  

Until it doesn't.

The corporate veil and how it's commonly overlooked

At it's simplest, the corporate veil means the company is a separate legal entity from its owners, so a corporation or LLC can own property and enter into contracts independently, and limited liability helps protect personal assets from business debts while also making it easier to pool capital and support investment-driven economic growth.  

For business owners, entrepreneurs, and investors using corporations or LLCs, that protection only works if you respect the rules that keep the entity separate. Piercing the veil and personal liability occur when you don't follow corporate formalities: the rules you must follow to stay protected.  

In certain circumstances, courts determine that veil piercing applies, including fraud, inadequate capitalization, failure to maintain a registered agent or other compliance requirements, and commingling personal and business finances among others. Piercing the veil succeeds in almost 50% of cases. Which means a lot of people aren't paying attention to their corporate formalities.

This is a serious problem, and one, many formation and registered agent companies overlook. When you're forming for fast and cheap, the critical pieces that actually make your entity secure often get ignored or passed off to a marketplace of lawyers without next steps or guidance. "Limited Liability" gets tossed around indifferently by many services looking to sell you a formation or registered agent service. The truth is, they often don't enact the very basic processes required to preserve that limited liability.

What does Corporate Direct do to help you, a business owner, limit personal liability?

Corporate Direct is different. We are an asset protection company first. Our services are focused on forming and maintaining entities in a manner that provides our customers the best possible defense when faced with a lawsuit. This includes our structuring and operating agreements upon formation and are followed through with the maintenance of said entity post-formation.

If you already have an entity, you're unsure if you have any personal liability exposure and you want to get strong asset protection strategies implemented, our team will recommend our Corporate Cleanup service first. This clean up process is a rigorous review of your entity both at the state level, and at the document level. Our team will work with you directly to identify the areas where you may have weaknesses in your corporate veil, build a plan of action and create or restore your corporate veil.  

What can't Corporate Direct do to help limit personal liability?

Corporate Direct is a paralegal service, and as such, we're limited to what we can perform on your behalf. In these situations, our partnership with Sutton Law Center, thoroughly vetted attorneys and CPAs can help provide additional legal and tax advice support needed to fully realize our cleanup findings. As your advocate, we'll ensure, that if we run into any limitations, and you elect to speak with any of our partners, that they are provided thorough and precise context to help assist you in making the appropriate decisions for your venture.

‍