This is How the Corporate Veil Gets Lost or Breached

Corporations are their own legal entities, and when they get sued it is the company, not the owners, officers, or directors individually, who are liable. That’s one main advantage of forming a company in the first place. But that protection–called a corporate veil–is not absolute, and it can be lost, thus exposing individual owners or officers to personal liability.

The corporate veil is pierced either accidentally, or purposefully.

Accidents have to do with people who do things accidentally that they don’t realize are exposing their assets individually to potential liabilities and lawsuits.

Signing or Being Named the Wrong Way

One example is signing a contract in an owner or officer’s individual capacity, instead of in their capacity as an owner or officer of the company. And that language shouldn’t just be in the signature line; the parties in the agreement at all times, should be identified as owners or managers or officers of the company, to make it explicitly clear, that signors are not signing or agreeing to any document, in their individual capacity,

For example, if you are named as “Jane Smith” in the contract itself, but sign it as “Jane Smith as president of ABC Company,” you could unknowingly be exposing yourself, personally, to judgments and liability because it isn’t clear if you, individually, or you, as president of the company, are signing and agreeing to the document.

Commingling Assets and Debts

When we own a company, we tend to think of it as ours. So, who cares if money gets deposited into our personal bank accounts, or if our car payment is made directly from corporate funds, or if you pay a corporate expense, with a personal check, right?

The problem with that, is that you start to blur the line between you, personally, and you, as an agent of the company. You become what is known as an alter ego to the company–there is no division financially or accounting-wise between you and your company, so they can be treated the same–including being liable for a judgment.

Intentional Wrongs That lead to Exposure

Then there are times when people do things intentionally that expose them to corporate liability.

Just because the company, and not you, is liable for what the company does, does not mean that you can do something that you know is wrong, and “hide” behind the company.

When an officer, director, partner, or other person in authority does something individually wrong, they can still be individually sued–even if they did those things in their capacity as a corporate officer.

Things like defrauding people, or intentional acts like defamation or tortious interference with contract, or theft, or breaches of fiduciary duties–all of these can lead to the piercing of the corporate veil.

Whether you’re getting sued in your personal or corporate capacity, get help today. Call our Fort Lauderdale business and commercial litigation attorneys at Sweeney Law P.A. at 954-440-3993.

Source:

unr.edu/business/centers/ozmen/ozmen-center-blog/alter-ego