As explained previously on this blog site, the law will limit the liability of a corporation to its assets.  Thus, if creditor obtains a judgment against a corporation for $500,000 and the corporation only owns $200,000 in assets, the creditor cannot look to the assets of the corporation’s shareholders or an inter-related business entity to satisfy the balance of the debt. There are times, however, when the courts will pierce the corporate veil.  There are a number of factors that a court will look to for purposes of addressing a request of this nature.

The first is to determine the extent to which the shareholder or related entity controlled the corporation.  In this regard, the control of the corporation can not be so dominant as to deprive the corporation of its separate existence.

The second is whether the corporate form is being used to create a fraud or an injustice.  In short, the corporation should not be allowed to use its form as a shield to circumvent its responsibility under the law.

Finally, there must be a causal relationship between the two factors referenced above and the loss sustained by the claimant who seeks to pierce the corporate veil.