Piercing the Corporate/LLC Veil, or ‘Through the (Creditor’s) Looking Glass’?

“What It Is?”

In Part 1 of Business Asset Protection, we took up ‘Piercing the corporate (or LLC) veil.’ As we stated there,

‘piercing the veil’ … is a legal principle sometimes used by courts to ignore the normal liability shield associated with a corporation or LLC. What happens is that a creditor or claimant alleges the entity is being used for fraud or some other wrongful action affecting the creditor. If the court agrees, it might permit the creditor to satisfy its judgment against the assets of the owners of the corporation or LLC.

A limited liability company (not ‘limited liability corporation‘) is a specific type of legal entity. It is one of the choices for doing business, in addition to corporations, partnerships, trusts, etc. Many business people seem to think it is only a kind of business registration or license, but it’s much more than that!

The U.S. federal income tax falls on pretty much every person and legal entity in the Country. So people, corporations, trusts and estates* and similar things are all subject to the income tax system.

The business world is host to a menagerie of organizations. To get this started, let’s have a little quiz:

Which of the following is NOT a form of legal entity?
(a) Massachusetts business trust
(b) S corporation
(c) Limited liability limited partnership
(d) Joint venture
(e) All of these are legal entity forms

Why Form Your LLC in New Mexico? This is America and you have a choice to form your LLC or corporation in any state. Certain states like Nevada and Delaware do offer specific corporate/LLC law and tax advantages. But most of these advantages are not useful to the very small businesses that are just starting […]

Jargon Item of the Month: March “Registered Agent/Registered Office.” This is the official “contact point” for a corporation, limited liability company and certain partnerships. As such, the agent will receive official correspondence from the Secretary of State and other state agencies. In some states, the “registered agent” may be called “resident agent” or "agent for […]

Business Asset Protection Does It Really Work? When you are starting a business, you may read about setting up a business entity through which you will conduct your business. One of the big reasons for doing so, you read, is to protect your personal assets from exposure to potential liabilities and claims involving the business. […]

“TAXING QUESTIONS” Do I Need a (new) EIN? We are frequently asked whether an EIN number is needed for a new LLC or corporation. For any who don’t know – or have forgotten – the acronym ‘EIN’ stands for “Employer Identification Number.” Sometimes it’s also referred to by the more generic term “Taxpayer Identification Number” […]