What Is Corporate Veil Piercing?
The entire purpose of forming a corporation or LLC is to create a legal shield (the "corporate veil") between the business and the owner's personal assets. If the business is sued or goes bankrupt, only the company's assets are at risk; the owner's personal house, car, and bank accounts are protected.
However, Florida courts will pierce the corporate veil and destroy that protection if the owner abused the corporate structure. Piercing the veil means the judge rules that the corporation is a sham, and the owner must personally pay the company's debts out of their own pocket.
When Florida Courts Pierce the Veil
Florida courts apply a multi-factor test. The most common grounds for piercing include:
- Commingling of Funds — The owner uses the company's bank account to pay personal bills (mortgage payments, vacations, car payments). There is no separation between the owner's wallet and the company's wallet.
- Undercapitalization — The owner formed an LLC with $100 in assets to operate a multi-million-dollar construction business. The company was never given enough capital to operate legitimately or pay potential claims.
- Failure to Observe Formalities — The owner never held board meetings, never kept corporate minutes, never filed annual reports, and never issued stock certificates. The company exists only on paper.
- Fraud or Injustice — The owner deliberately used the corporation as a shell to defraud creditors, hide assets from lawsuits, or evade lien obligations.
The Alter Ego Doctrine
Florida courts frequently describe veil piercing through the "alter ego" test: if the corporation is merely the "alter ego" of the individual (meaning there is no real distinction between the two), the court will treat the owner and the company as one and the same entity, exposing the owner to unlimited personal liability.
Related Terms
- Corporation — The legal entity whose protective veil is being pierced
- Corporate Veil — The liability shield that piercing destroys
- Damages — The financial judgment the owner becomes personally liable for
Barnes Walker Corporate Litigation
Barnes Walker's commercial litigators both pursue and defend corporate veil piercing claims in Florida courts, aggressively exposing sham LLCs that defraud creditors, and vigorously defending legitimate business owners whose corporate structures are being unfairly attacked. Request a legal inquiry for assistance.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC