{"id":5104,"date":"2016-04-04T11:47:54","date_gmt":"2016-04-04T16:47:54","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/smallbusiness\/liability-and-insurance\/officer-and-director-liability-piercing-the-corporate-veil.html"},"modified":"2024-05-23T03:26:30","modified_gmt":"2024-05-23T08:26:30","slug":"officer-and-director-liability-piercing-the-corporate-veil","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/smallbusiness\/liability-and-insurance\/officer-and-director-liability-piercing-the-corporate-veil.html","title":{"rendered":"Officer and Director Liability: Piercing the Corporate Veil"},"content":{"rendered":"\n
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Piercing the Corporate Veil<\/h1>\n
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\n By Susan Buckner, J.D.<\/a> | Legally reviewed by Aviana Cooper, Esq.<\/a>\n | Last updated\n
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When small business owners discuss business structure with a corporate law attorney, they sometimes ask what might happen if they get sued. A business attorney can explain all the differences between a sole proprietorship and a limited liability company (LLC) or corporate entity. One of the most critical distinctions is the protection of the owner’s assets in a legal action.<\/p>\r\n

What Is the ‘Corporate Veil’?<\/h2>\r\n

Owners are personally liable for the company’s debts in a sole proprietorship or partnership. The business is not a separate entity from its owners. A plaintiff can seize the owner’s personal assets to pay a judgment against the business.<\/p>\r\n

In an LLC or corporation, the business entity protects the personal liability of the owners, officers, and shareholders<\/a>. The company owns the business assets, not the owners or board of directors. This "corporate veil" protects the owners’ assets in case of legal action.<\/p>\r\n

Piercing the Corporate Veil<\/h2>\r\n

When individuals use the corporate veil to conceal acts of wrongdoing, courts will order the limited liability protection lifted. "Piercing the corporate veil" allows a judgment<\/a> to reach the personal assets of the owners and officers.<\/p>\r\n

Piercing the corporate veil is rarely done in courts. The courts will not lift the veil merely because a business cannot pay a judgment. Corporate assets must pay for corporate debts unless the court finds good reason to remove the veil and take the individual owner’s property. Two elements must exist to pierce the veil.<\/p>\r\n