You own a corporation that picks up grease from McDonalds. Your corporation has

Question

You own a corporation that picks up grease from McDonalds. Your corporation has $2,000.00 in the bank account and has always been underfunded and you sometimes pay your house payment out of the corporate bank account (co mingle the corporate funds with your personal expenses). One of your drivers has an accident and spills grease all over the highway and causes 1.7 million dollars in damages. You ell the lawyers, " well the corporation only has $2,000.00". The lawyers says they are going to pierce the corporate veil and sue you individually. Why can he lawyer sue you individually even though you set up a corporation? Explain piercing the corporate veil and BE SURE and answer my question.

Explanation / Answer

Corporate veil shields the owners and shareholders of a company from being held personally responsible for the debts of a corporation. However, in some cases courts can pierce the corporate veil of a corporation and the individuals can be held liable for the debts of the business. Courts generally pierce the corporate veil under the following circumstances:

In the given scenario, it is seen that the bank account of the corporation is always underfunded. Besides, owner of the company pays his house payment using the company’s bank account which can be considered as comingling of corporate funds. Hence, due to the given reasons lawyer can sue the owner individually, even though he owns a corporation.   

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