ASSET PROTECTION TRUSTS

Piercing the Corporate Veil To Collect a Business Debt

When another business owes your company money and you’ve exhausted all your collection options, you may be wondering if you are out of options. If a company closes down, there are some circumstances where the company’s owners or officers can be held personally liable for the debt that is owed to your business.

If a court determines that an owner or officer used the “veil” of the corporation structure to shield themselves from debt responsibility, you may be able to collect on the business debt. When a court rules that such individuals are personally liable, it is known as, “piercing the corporate veil.”

If you’re attempting to collect money from a defunct company, you may be able to pierce its corporate veil by seeking a court judgment against its owners. A court will look at the following factors in making its ruling:
  1. If the company engaged in fraudulent behavior
  2. If the company failed to follow corporate formalities
  3. If the company was under-capitalized
  4. If one person or a small group of closely related people were in complete control of the company














Jay Lashlee, True Trust Book by Jay Lashlee