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 Understanding Bankruptcy Trends Can Benefit Your Business post image

How Understanding Bankruptcy Trends Can Benefit Your Business

The bankruptcy legal landscape presents both challenges and opportunities for businesses navigating financial distress. Understanding current bankruptcy trends can help businesses make more informed and strategic decisions. Corporate Bankruptcy Filings Trending Upwards Bankruptcy filings continued to trend upwards in 2024. According to statistics released by the Administrative Office of the U.S. Courts, personal and business […]

Author: Brian D. Spector

Link to post with title - "How Understanding Bankruptcy Trends Can Benefit Your Business"
SEC Takes Actions Against Issuers for Failure to File Form D post image

SEC Takes Actions Against Issuers for Failure to File Form D

In December, the U.S. Securities and Exchange Commission (SEC) announced charges against two privately held companies for failing to file a Form D notice, which is generally utilized for exempt securities offerings. Here, the SEC’s enforcement sends a strong message: compliance with regulatory requirements is not optional and failure to comply can have significant consequences. […]

Author: Kenneth C. Oh

Link to post with title - "SEC Takes Actions Against Issuers for Failure to File Form D"
Redefining Labor Relations: NLRB's Pivot from Abruzzo’s Memoranda post image

Redefining Labor Relations: NLRB's Pivot from Abruzzo’s Memoranda

On February 14, 2025, the Office of General Counsel (OGC) of the National Labor Relations Board (NLRB) under Acting General Counsel William B. Cowen issued Memorandum 25-05, “New Process for More Efficient, Effective, Accessible and Transparent Case handling.” The Memorandum rescinds nearly all of the Memoranda issued by his direct predecessor, Jennifer Abruzzo, setting the […]

Author: Matthew F. Mimnaugh

Link to post with title - "Redefining Labor Relations: NLRB's Pivot from Abruzzo’s Memoranda"
What Are FIRPTA Withholding Requirements? post image

What Are FIRPTA Withholding Requirements?

If you purchase real property from a foreign person or entity, you may be required to withhold taxes from your payment to the seller under the Foreign Investment in Real Property Tax Act (FIRPTA). The federal tax law is designed to ensure that foreign sellers pay any applicable capital gains tax on profits realized from […]

Author: Jesse M. Dimitro

Link to post with title - "What Are FIRPTA Withholding Requirements?"
Does Your Homeowners Insurance Provide Adequate Coverage? post image

Does Your Homeowners Insurance Provide Adequate Coverage?

Your home is likely your greatest asset, which is why it is so important to adequately protect it. Homeowners insurance protects you from the financial costs of unforeseen losses, such as theft, fire, and natural disasters, by helping you rebuild and replace possessions that were lost While the definition of “adequate” coverage depends upon a […]

Author: Jesse M. Dimitro

Link to post with title - "Does Your Homeowners Insurance Provide Adequate Coverage?"
Understanding the Importance of a Non-Contingent Offer post image

Understanding the Importance of a Non-Contingent Offer

Making a non-contingent offer can dramatically increase your chances of securing a real estate transaction, particularly in competitive markets like New York City. However, buyers should understand that waiving contingencies, including those related to financing, or appraisals, also comes with significant risks. Determining your best strategy requires careful analysis of the property, the market, and […]

Author: Jesse M. Dimitro

Link to post with title - "Understanding the Importance of a Non-Contingent Offer"

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: