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Read an excerpt from ‘Piercing the Corporate Veil,’ featured in BGD Magazine

In our first issue of BGD Magazine, we’re focused on business transactions and “Getting Deals Done.” But business deals can turn sour, and sometimes, a company’s debts become a personal liability. Read the following excerpt from “Piercing the Corporate Veil” to learn more.

One of the bedrock principles of business law is that the owner of a corporation or other similar business entity, such as a limited liability company, is usually not personally responsible for the company’s liabilities. Indeed, perhaps the best reason for a person(s) to conduct business as a separate legal entity such as a corporation is to benefit from this protection. This centuries-old rule was designed not only to protect individual wealth, but also to encourage the formation of new business and expand the flow of commerce.

This protection, however, is not absolute. While courts are reluctant to pierce the corporate veil and hold the owners of a business personally liable for the actions of the business, they may do so to prevent fraud or injustice to third parties. A third party may only recover from an owner of a corporation if the party proves that the corporate form was so ignored, controlled or manipulated that it was merely the alter ego of the owner and that the misuse of the corporate form would constitute a fraud or promote injustice.

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