“Piercing the corporate veil” is a serious risk that is easily avoided. In rare cases, courts will “pierce the corporate veil” and hold a corporation’s principals personally liable for what would otherwise be a liability of the corporation. This occurs when the court finds that the corporation’s principals have not operated the business as though it is a corporation and are therefore not entitled to the limited liability protection they would otherwise have.
You can easily eliminate the chance that a court will remove your corporation’s limited liability protection. Simply follow the state requirements regarding the organization and operation of corporations. It is important that you hold your corporate meetings and keep your minutes, documents and records in order. You should also adhere to the state’s distinction between directors, officers and shareholders.
Don’t neglect what sometimes appears to be unimportant record keeping. It could prove to be costly.
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