Piercing The Corporate Veil - Basis For Limited Liability

Basis For Limited Liability

See also: Limited liability
Companies law
  • Company
  • Business
Business entities
  • Sole proprietorship
  • Partnership
  • Corporation
  • Cooperative
European Union / EEA
  • EEIG
  • SCE
  • SE
  • SPE
UK / Ireland / Commonwealth
  • Community interest company
  • Limited company
    • by guarantee
    • by shares
    • Proprietary
    • Public
  • Unlimited company
United States
  • Benefit corporation
  • C corporation
  • LLC
  • Series LLC
  • LLLP
  • S corporation
  • Delaware corporation
  • Delaware statutory trust
  • Massachusetts business trust
  • Nevada corporation
Additional entities
  • AB
  • AG
  • ANS
  • A/S
  • AS
  • GmbH
  • K.K.
  • N.V.
  • Oy
  • S.A.
  • more
Doctrines
  • Business judgment rule
  • Corporate governance
  • De facto corporation and corporation by estoppel
  • Internal affairs doctrine
  • Limited liability
  • Piercing the corporate veil
  • Rochdale Principles
  • Ultra vires
Related areas
  • Civil procedure
  • Contract

Corporations exist in part to shield the personal assets of shareholders from personal liability for the debts or actions of a corporation. Unlike a general partnership or sole proprietorship in which the owner could be held responsible for all the debts of the company, a corporation traditionally limited the personal liability of the shareholders. The limits of this protection have narrowed in recent years. Shareholders are increasingly personally liable.

Piercing the corporate veil typically is most effective with smaller privately held business entities (close corporations) in which the corporation has a small number of shareholders, limited assets, and recognition of separateness of the corporation from its shareholders would promote fraud or an inequitable result.

There is no record of a successful piercing of the corporate veil for a publicly traded corporation because of the large number of shareholders and the extensive mandatory filings entailed in qualifying for listing on an exchange.

Read more about this topic:  Piercing The Corporate Veil

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