Alter Ego Liability

Full Video Transcript

If you work hard and closely identify with your business, then it may seem like your business is your alter ego – that you are one and the same. However, if you are part of a corporation that is properly run, then you likely have legal protection from personal liability for the debts, losses, and liabilities of the business. That protection only extends to you if the corporation is legally and functionally a separate entity from you. Otherwise, if you and the other owners have acted in a way to make a court believe that the corporation is only a shell and not a separate entity, then the court may find you personally liable for the illegal actions of the company on a theory of “alter ego liability.” In order to determine if the alter ego liability theory should be applied, and if your personal assets should be used to satisfy any judgments against the business, the court will look to see whether you used the business for your own personal purposes, whether the business kept good records, whether your finances were comingled with the business, and how the other owners operated with respect to the business.