Be Formal With Your Business: Avoiding Corporate Veil Piercing (Part 2)

Some of the factors courts will look to in determining whether a businesses liability veil should be pierced and a business level liability should become an owner's liability include:

1. Inadequate capitalization- The business should have enough capital available to pay its reasonably foreseeable debts.

2. Not complying with corporate formalities- The business should comply with all record keeping requirements imposed by statute and document its acts as a separate legal entity from its owner or owners.

3. Complete domination and control over the business by an owner so that the business has no separate identity- The business should never comingle its funds with the funds of an individual owner and should have appropriate safeguards in place to avoid the situation of complete domination by an owner.  An LLC or corporation should have appropriate documentation in writing governing its operations to prevent this factor as well.  This includes a sufficient operating agreement for an LLC and bylaws and (potentially) a shareholder's agreement for a corporation.

This list is not exhaustive but does provide some basic ideas of how business owners might avoid a situation where a business liability becomes an owner's liability.

 

Be formal with your Business: Avoiding Corporate Veil Piercing (Part 1)

One of the main reasons to form a business entity is to separate business property and business liabilities from those of the individual owners.  However, in certain cases, a business transaction can lead not only to liability to the business, but also to the individual owner/owners.

The main reason for this outcome is the protection of an innocent injured party from fraud or other wrongdoing committed by a business who does not have adequate assets to cover the damage caused.  When the owner who directs or commits the wrong in the business's name then tries to claim that the injured party can only reach the inadequate assets of the business, typically the claim being brought will include veil piercing in court.

As a business owner it is important to properly form and run a businesses to avoid a potential situation where a business liability could become a liability of an individual owner.  In the next post, we will look at what actions can potentially lead to individual liability for an owner of a business.

North Carolina Estate Planning: Preparation is Key

It’s been said there are only two certainties in life, and death is one of them. Paying taxes, of course, is the other.  Incidentally, sometimes even at death, taxes are due. Proper planning for one’s family after death necessitates the help of an attorney with knowledge of North Carolina estate planning law.

A will is the basic cornerstone of any estate plan. It generally directs the disposition of assets after death, provides for certain fiduciaries and defines their powers, nominates a guardian for minor children, and provides what will occur in the event of a simultaneous death of a person and their spouse, among other things. Sometimes, in addition a trust may be used to hold title to assets and provide management for beneficiaries.  For anyone in the greater Charlotte, NC area interested in executing a will, it is a good idea to seek legal counsel from a Charlotte estate planning attorney.

In addition to a basic Will, there are two other main documents typically prepared in a basic estate plan.  A Durable Power of Attorney is used to appoint a trusted agent to act on your behalf financially, should you not be able to act.  A Health Care Power of Attorney appoints a trusted agent to act on your behalf regarding health care decisions.   Many NC estate planning attorneys also include, within a Health Care Power of Attorney, a living will (of advance directive) which allows decision making in advance regarding end of life medical treatment.

Finally, in some estates, planning for possible estate tax issues may be necessary.  This requires more advanced planning but can be incredibly beneficial.