Scarinci Hollenbeck, LLC, LLCScarinci Hollenbeck, LLC, LLC

Firm Insights

Are You The "Alter Ego" Of Your New York Corporation?

Author: Dan Brecher

Date: June 30, 2017

Key Contacts

Back

Don’t Be the “Alter Ego” of Your New York Corporation

Limited liability is one of the greatest advantages of establishing a corporation or limited liability corporation (LLC) because it shields New York business owners from personal liability for business debts. However, limited liability is not unconditional.

Therefore, start-ups and other New York businesses should be aware that there are circumstances under which courts will hold an LLC or corporation’s owners, members, and shareholders personally liable for business debts by “piercing the corporate veil.” Liability typically arises when a plaintiff claims that an LLC or corporation is not a distinct entity, but rather an “alter-ego” being used by the owners, members, and/or shareholders to advance their own personal interests or perpetrate a fraud.

To ensure you don’t end up in this situation, here are a few guidelines to keep in mind:

  • Comply with formal rules for forming and maintaining a New York corporation or LLC.
  • Maintain a separate bank account for your company.
  • Don’t commingle personal assets with those of your business.
  • Don’t divert any business assets for personal use.
  • Make a reasonable initial investment in your business so that it is adequately capitalized.
  • Don’t personally guarantee payment of debts of your business.
  • Don’t use your company to engage in illegal, fraudulent, or reckless acts.
  • Clearly show that you are operating a corporation or LLC by identifying the company status on business materials, such as letterhead and invoices.
  • Create and use a company email address for all company business; not your personal email.
  • When signing company documents, clearly state that you are signing on behalf of your business by indicating the name of the company as well as your title.

This is certainly not an exhaustive list, and courts make a detailed analysis before deciding whether to impose personal liability on the company’s principals.

If a court pierces the corporate veil, the company’s owners, members, and/or shareholders can be held personally responsible for the company’s liabilities. This means your personal assets, such as your bank account, your car and even your home, then become accessible to creditors and others seeking relief. If you are concerned about your potential liability for the debts of your business, it is always a good idea to consult with an experienced business attorney.

One final point: do not dissolve your corporation during a lawsuit. There are a number of decisions holding shareholders liable for corporate obligations solely because they chose to dissolve their corporation during litigation against the company.

Do you have any questions? Would you like to discuss the matter further? If so, please contact me, Dan Brecher, at 201-806-3364.

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Scarinci Hollenbeck, LLC, LLC

Related Posts

See all
How to Dissolve a Corporation in New Jersey: A Step-by-Step Guide post image

How to Dissolve a Corporation in New Jersey: A Step-by-Step Guide

Closing your business can be a difficult and challenging task. For corporations, the process includes formal approval of the dissolution, winding up operations, resolving tax liabilities, and filing all required paperwork. Whether you need to understand how to dissolve a corporation in New York or New Jersey, it’s imperative to take all of the proper […]

Author: Christopher D. Warren

Link to post with title - "How to Dissolve a Corporation in New Jersey: A Step-by-Step Guide"
Gross Lease vs. Net Lease: Understanding the Key Differences post image

Gross Lease vs. Net Lease: Understanding the Key Differences

Commercial leases can take a variety of forms, which is often confusing for both landlords and tenants. Understanding the different types, especially the gross lease structure, is important when selecting the lease that best suits your needs. One key distinction between lease types is how rent is calculated and paid. This article addresses the two […]

Author: Robert L. Baker, Jr.

Link to post with title - "Gross Lease vs. Net Lease: Understanding the Key Differences"
What to Do If You Are Impacted by a Retailer Bankruptcy Part 2 post image

What to Do If You Are Impacted by a Retailer Bankruptcy Part 2

Over the past year, brick-and-mortar stores have closed their doors at a record pace. Fluctuating consumer preferences, the rise of online shopping platforms, and ongoing economic uncertainty continue to put pressure on the retail industry. When a retailer seeks bankruptcy protection, a myriad of other businesses are often impacted. Whether you are a supplier, customer, […]

Author: Brian D. Spector

Link to post with title - "What to Do If You Are Impacted by a Retailer Bankruptcy Part 2"
The Current Administration's Proposals for the Financial Services and Banking Industries Will Affect Your Business post image

The Current Administration's Proposals for the Financial Services and Banking Industries Will Affect Your Business

Since his inauguration two months ago, Donald Trump’s administration and the Congress it controls have indicated important upcoming policy changes. These changes will impact financial services policies and priorities. The changes will particularly affect cryptocurrency, as well as banking rules and regulations. Key Regulatory Changes in Cryptocurrency For example, in the burgeoning cryptocurrency business environment, […]

Author: Dan Brecher

Link to post with title - "The Current Administration's Proposals for the Financial Services and Banking Industries Will Affect Your Business"
Tips for Commercial Landlords Impacted by Wave of Retailer Bankruptcies Part 1 post image

Tips for Commercial Landlords Impacted by Wave of Retailer Bankruptcies Part 1

The retail sector has experienced a wave of bankruptcy filings over the last year. Brick-and-mortar businesses in financial distress include big-name brands like Big Lots, Party City, The Container Store, and Vitamin Shoppe. When large retailers seek bankruptcy protection, they are not the only businesses impacted. Landlords can be particularly hard hit. While commercial landlords […]

Author: Brian D. Spector

Link to post with title - "Tips for Commercial Landlords Impacted by Wave of Retailer Bankruptcies Part 1"

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Sign up to get the latest from our attorneys!

Explore What Matters Most to You.

Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.

Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.

Let`s get in touch!

* The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!

Please select a category(s) below: