Money, sales tax and addresses · A term for founders abroad
What is piercing the corporate veil?
A court holding a company's owner personally liable for its debts, usually because the company wasn't run as separate from the owner.
Checked against the IRS's instructions and the states' own rules. Reviewed by Saais Patel, compliance reviewer.
Term 77 of 105 in the glossary, filed under P.Every term, A to Z
Piercing the corporate veil, for a founder abroad.
Limited liability is the default, but a court can set it aside where the company was a shell: no separate accounts, no operating agreement, no records, and an owner who treated it as a personal wallet. Then the owner is personally liable for the company's debts.
You keep the protection with the boring things: a bank account, an operating agreement, a record of distributions and up-to-date filings. Commingling is the usual way founders lose it.
What founders ask next.
- Can a single-member LLC's veil be pierced?
- Yes, and courts look harder at one-owner companies. Separate money and a signed operating agreement are the best defence.
- What do courts look for?
- Mixed money, missing records, no operating agreement, and a company too thinly funded for its business.
03 · See also
- Money, sales tax and addressesComminglingMixing a company's money with its owner's; the most common way an LLC's owner loses the liability protection the LLC exists to provide.Read the term
- Keeping the company in good standingGood standingThe status of a company that has filed and paid everything its state requires; lost by missing a report or tax, and proved by a certificate.Read the term
- The company itselfOperating AgreementThe private contract among an LLC's members that sets ownership, management and what happens when someone leaves; it isn't filed with the state.Read the term
- Money, sales tax and addressesNexusThe link with a state that obliges a seller to collect its sales tax, created by a presence there or by sales above the state's threshold.Read the term
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