How can your creditors pierce the corporate veil to access your personal assets to settle a debt? Many clients and business people want to know what the protections of a corporation are and how creditors can pierce the 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 corporation itself, creditors are not able to pursue you personally in order to satisfy corporate debts or liabilities.
How can your creditors pierce the corporate veil? 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 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 corporation.
The goal of the creditor always comes down to setting aside the protections of the corporation, so they can pursue you personally to satisfy a debt or corporate obligation.
How can your creditors pierce the corporate veil as it stands today? If you are concerned about the protections associated with your corporation or LLC we invite you to review the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.