But What Does It Mean? ‘Piercing the Corporate Veil’

Posted on April 3, 2014 in Form a Company

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Yes, legalese is its own language. Like the Latin spoken at the Vatican, it’s truly understood only by a few.

So for the rest of us, here’s a handy definition of a term relevant to all business owners (whether a corporation or an LLC):

piercing the corporate veil

It’s considered a privilege to be able to do business in a way that creditors can’t get to your personal assets. But some business owners abuse the privilege. In those situations, a court will let a creditor ignore the fact that you’ve formed a corporation (or an LLC)–the “corporate veil”–and hold you personally responsible for the debts you’ve accumulated.

Are you treating the business like your own personal slush fund, paying out personal expenses through the business? That’s a problem. Have you failed to comply with corporate paperwork and the niceties of annual minutes? That’s another strike against you. For more on this, read about “The Simple But Powerful Reasons for Corporate Minutes.”

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