Orange County Business Lawyers
Business owners often incorporate to protect themselves from personal liability. However, there are situations when the corporate shield is set aside and individual shareholders can be held accountable for corporate actions. A court may "pierce" the corporate "veil" (protection) and hold the individual shareholders liable for certain business debts, or actions taken by the corporation against other companies or individuals. The individual shareholders become the "alter ego" of the corporation and become personally liable.
Piercing the Corporate Veil
A corporation's veil may be pierced when:
- The corporation was undercapitalized — there was not enough money initially to start the business
- The corporation was not properly formed — failed to file the proper incorporating documents
- The corporate officers have commingled funds of personal and business—for example, a personal mortgage was paid from a corporate account
- The corporation fails to hold itself out as a corporation — for example, quotes or contracts fail to state the company's corporate name
- The shareholders fail to observe corporate formalities — maintain minutes or adequate corporate records
When the alter ego doctrine is applied by a judge, a corporation's shareholders are treated as though there is no corporate veil or shield. The shareholders become personally liable for the actions of the corporation. Piercing the corporate veil is disastrous for any company and its shareholders.
If you have been personally named in a business lawsuit along with your corporation, or are named but your corporation is not, contact the business litigation attorneys at Jacobs & Dodds immediately. We will review your corporate documents and ensure that your company is structured properly. We will take swift decisive action to protect you from personal liability.
Contact our Alter Ego Doctrine Attorneys
Contact Jacobs & Dodds for a free consultation with an experienced California business law and transactions attorney or to speak with an experienced trial lawyer from our business law firm.
Free initial consultations • Phone calls always free • Extensive trial experience • Located next to John Wayne-Orange County Airport