What Is The Corporate Veil?

Normal 0 false false false EN-US JA X-NONE /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:12.0pt; font-family:Times;} This is the first in a two-part series that will focus on the legal concept of the “Corporate Veil,” with this first part defining the concept and explaining how it applies to your business. The second part will go in-depth and explain what it means for your company’s corporate veil to be “pierced” by a court of law such that the shareholders’ asset protection is compromised.

Piercing the Corporate Veil in California

This is the first in a two-part series that will focus on the legal concept of the “Corporate Veil,” with this first part defining the concept and explaining how it applies to your business. The second part will go in-depth and explain what it means for your company’s corporate veil to be “pierced” by a court of law such that the shareholders’ asset protection is compromised.Corporate Veil

What is the Corporate Veil?

As a general definition, the corporate veil is a layer of protection that exists between the assets of a corporation and the assets of the shareholders of the corporation. When a company is incorporated, the default position that the law takes when looking at the assets of the corporation is to treat them as separate from the assets of the owners of the corporation for purposes of litigation and satisfying a judgment. One of the primary benefits of operating a business as a corporation is that if the business incurs debts or liabilities—including both expenses or adverse judgments—a court will only look to the corporation’s assets and not the shareholders’ personal assets, such as a house, a car, or a savings account.

Limiting Personal Liability

The ability to limit a business owner’s personal liability by transacting business as a corporation is one of the key ways that a corporation can be beneficial. However, this concept has also been applied in the context of limited liability companies (LLCs) wherein a company can limit the personal liability of its members by operating as an LLC.

It is important for a corporation or a limited liability company to comply with legal formalities in order to avoid having the company’s veil pierced and personal assets being used to satisfy company debts or obligations. The next part in this series will further explore when the corporate veil is pierced and help you understand how to avoid it.

ODGERS LAW GROUP specializes in corporate formation and can help you form the entity that is best for you while ensuring your personal assets remain protected. To learn more about business formation or to schedule your free consultation with Mr. Odgers, contact us by e-mail, call us at (858) 869-1114, or schedule your appointment online here.

Share:

More Posts

Estate Planning Online

Why Your Business Cannot Afford a Cyber Security Breach

Every single day, more of our activities become digital and take with them huge reams of personal data that can easily be exploited for profit and influence by those with the willingness and inclination to cross ethical boundaries. Cyber Security is the system of protecting that personal data that is kept digitally.

Estate Tax Exemption 2020

New Federal Estate Tax Exemption Amount | 2021 Update

In 2021 the federal Estate Tax Exemption is 11.7 million for an individual or 23.4 million for a married couple. California currently does not impose any additional estate tax for California Residents. Read More on the Odgers Law Group Blog.

Send Us A Message

Scroll to Top