Consider this basic business question: Can your creditors pierce the corporate veil to access your personal assets to settle a debt?  Many clients and business people fail to fully understand and protect the integrity of the corporation itself and how creditors can pierce the corporate veil to pursue your personal money and assets.

Why Do You Have a Corporate Entity?

Why do you have a corporate entity in the first place?  Why should you be concerned about keeping up the protections of your corporate veil?  A corporation provides protection to its owners by separating the business entity from the personal lives or other business entities that own the business itself.  Any corporation or LLC is considered a separate “entity” under California law, and as long as you maintain the protections of the corporate veil itself, creditors are not able to pursue you personally in order to satisfy corporate debts or liabilities.

Can Your Creditors Pierce the Corporate Veil and Get to Your Money, Home and Other Assets?

Can your creditors pierce the corporate veil?  Do you want to protect your home, personal funds and assets that you have worked so hard to develop? The first and easiest tactic to allow a creditor to pierce the corporate veil and come after a business owner personally is the commingling of personal and business assets.

If you use corporate money to pay for personal debts, or use your personal checking account to pay for a corporate transaction you may be accused of “commingling.” The creditor’s argument is basically that there is no difference between you, the person, and the entity or corporation.  If the corporate documents are not kept up to date, and regular meetings of the members, shareholders or officers are not held and properly documented a creditor can challenge the integrity of the corporate veil.  Once the corporate veil is pierced, they have access to all of your personal money and assets including the equity in your home.

The goal of the creditor is always to investigate accounts, the LLC operating agreement or shareholders agreement, corporate minutes and reporting in order to set aside the protections of the corporation, so they can pursue you personally to satisfy a debt or corporate obligation.

Have you regularly held meetings including the recording of corporate minutes?  How recently have your corporate documents been reviewed and updated?  and corporate veil presently in and do you need to take action? Can your creditors pierce the corporate veil to access your personal assets to settle a debt?

If you are concerned about the protections associated with your corporation or LLC we invite you to review our podcast Episode 24 – Corporate Governance as well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.