Piercing the Corporate Veil

Full Video Transcript

If you’re an owner of a corporation, then you know that one of the greatest advantages to this business model is the personal liability protection. Corporations are independent entities in the eyes of the law, meaning that any losses, liabilities, or debts belong only to the corporation and not to the individual owners. If the corporation is subjected to a multimillion-dollar lawsuit verdict, for example, then only the corporate assets may be used to satisfy the judgment, not the personal assets of the individual owners. Yet in limited circumstances, the courts will find that this liability protection should not apply, and will “pierce the corporate veil,” thus allowing plaintiffs or debtors to recover damages from the personal assets of the corporation’s owners as well as the corporation itself. Generally, the corporate veil may be pierced if the corporation was just a shell for the owner’s individual acts, where the owners intentionally used their business to commit a wrongful act. Piercing the corporate veil is a matter of state law, and each state has its own precise rules for applying this doctrine.