What does it mean to pierce the corporate veil?
The term refers to the veil of protection that keeps businesses operating as corporations, partnerships, or limited liability companies (LLC) separate from their owners and shareholders. These principles and statues are present
in every state to protect business owners of all sizes. To pierce the corporate veil means an owner can be held personally responsible for debt, misconduct, and other actions that occur within the business. In Florida, the corporate veil may only be pierced upon a showing of misconduct
What elements must be present to pierce the corporate veil in Florida?
There are three elements that must be proven to determine if a business has pierced the corporate veil:
A creditor may be able to pierce the corporate veil of a corporation when the corporation has no assets, no income, and it has no way to honor the obligations of a contract, but enters into the contract anyway.
Similarly, if a parent company does not conduct any operations, does not have any employees or payroll, and it does not have bank accounts, but it uses a subsidiary company in order to avoid paying a creditor, the parent company’s corporate veil may be pierced.
How can business owners protect themselves?
Here are some business practices that are important to keep in place to ensure that you maintain the “corporate fiction” so that the corporate veil cannot be pierced:
Cynthia Simpson-Cannon, Palm Beach Business Attorney
Determining if a business entity’s corporate veil can be pierced in Florida is an extensive and difficult legal analysis that requires an experienced business attorney. Contact the Simpson-Cannon Law Firm today for more information.