Piercing the Corporate Veil: Undercapitalization and Common Ownership

Part three of the Piercing the Corporate Veil Series covering additional factors that may cause a court to pierce a corporation and go after its owners. This part covers undercapitalization (having more assets than liabilities), inadequate insurance, and common ownership of multiple companies under the umbrella of one parent company.

Generally, the a corporation or limited liability company acts to protect the individuals that own the company. However, that protection can be lost, or "pierced" if the business owners run their company in a way that justifies disregarding the corporate form or "corporate veil".

This is part three of the series discussing the circumstances where a court might rule that the corporate veil should be pierced. We talked about fraud in our first video, the failure to observe corporate formalities and intermingling company assets with personal assets in our second video, and this third installment covers two other types of ways a corporate veil can be pierced: Undercapitalization and Common Ownership of multiple companies.

What does it mean for a company to be undercapitalized or does not have enough insurance? What happens when someone does not have enough assets to cover their liabilities?

If there is a company that acts as little more than a shell with little to no insurance, doesn't have any assets it might be considered undercapitalized or underinsured. Similarly, if a parent company (or individuals) own a multitude of smaller businesses where the one being sued can just be shut down, a court might allow the corporate veil to be pierced so that the injured person can go after that parent company or the individual owners of the company to recover their damages.

For a more in depth discussion of the corporate veil, piercing the corporate veil, and additional real-life examples check out the Kaminsky Law Blog - https://kaminskylaw.com/what-is-the-c...

Links to the other two parts:
Part one: Explaining the definition of the corporate veil, what it means to pierce the corporate veil, and covering fraud as a reason to disregard the corporate form -    • Piercing the Corporate Veil: What doe...  
Part two: Covering failure to observe corporate formalities and intermingling corporate assets with personal assets -    • Piercing the Corporate Veil: Failure ...  
Real world example of intermingling assets:    • Piercing the Corporate Veil: Real Wor...  


Don't forget to Like, Comment, Share, and Subscribe 👍

Follow our socials below! 🧑‍⚖️‍📝
Facebook:   / kaminskylawllc  
Instagram:   / kaminskylaw  
Twitter:   / wedolawsuits  
LinkedIn:   / kami.  .
Check out our website for blog posts and more useful resources https://kaminskylaw.com/

Text or Call us at 215-876-0800 for a free consultation!

Reminder: This is NOT legal advice. Every situation is different. You should consult with a lawyer about your specific issue.