What happens when a creditor is able to pierce the corporate veil in California? How can a business owner, partner, member or shareholder help to keep creditors from piercing the corporate veil of your business in order to get access to your personal assets and those of your fellow partners?
Why Do You Have a Corporate Entity in the First Place?
Why do you have a corporate entity in the first place? Why do you have to go through the process of selecting an LLC, S Corporation, C Corporation or Professional Corporation and establishing a business entity? A San Diego LLC or Corporation exists to protect its owners from personal liability based upon the efforts and transactions of the business itself.
A business entity is a separate “individual” in the eyes of the law. The reason to establish an entity is to separate “the business” and all it’s assets and liabilities from the personal assets of those who own it. The personal assets of the partners, owners, members or shareholders, such as personal bank and investment accounts, the equity in your home, retirement accounts and plans, vehicles, personal possessions and collections are kept separate from and protected by the corporate entity. This protection – the safeguarding of your personal assets by the establishment of a separate business LLC or corporate “entity” – is known as the “corporate veil.”
Protecting the corporate veil is part of the corporate governance and compliance services provided by the Watkins Firm to our business and corporate clients.
Why Should You Be Concerned if a Creditor is Able to Pierce the Corporate Veil
Why should you work diligently to ensure corporate governance and compliance and to prevent the commingling of personal and business assets? What happens if a creditor is able to pierce the corporate veil of your entity?
Anyone who is owed money by the LLC or corporation including creditors or parties to lawsuits against the company want to be able to get at your personal assets, as well as those of the business. Your company exists to prevent them from being able to do what is known as piercing the corporate veil. In order to access your personal assets to satisfy any debt, obligation or judgment against the company a creditor must accomplish the task of legally “piercing the corporate veil”, in effect proving that the company or LLC is not a separate entity, but that the owner(s) either commingled company and personal money and assets, or they behaved in a manner that was fraudulent or deceitful.
You Need the Experienced, Proven San Diego Business Attorneys at the Watkins Firm
The Watkins Firm has served the San Diego and Southern California business community for more than three decades. You need the experienced, proven San Diego business attorneys at the Watkins Firm from the first moments of a business start-up to the successful merger or sale of your company. 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.
