When you are thinking of going into business in California, you may consider forming a corporation or a limited liability company (LLC). With both these organizations, you are protected from personal liability. Thus, if someone were to sue you, you can rest in peace with the thought that your personal property will not be included as settlement for liabilities.
Certainly the Courts do not “pierce the corporate veil” arbitrarily. There are two situations that must be both present for the Courts to look beyond the corporate entity and look for the liabilities of the shareholders. First, it is possible that the shareholders deem the corporation as part and parcel of their personal fortune – and not a distinct entity. This is known as “unity of interest.” It is also possible that the Court may deem the company to be condoning a fraudulent act of one of its shareholders. This is known as “inequitable result.”
Your corporation or LLC can avoid “being pierced”. This is where the as the guidance of an astute business lawyer can prove to be invaluable. We suggest to our clients that they comply with the annual formalities of California. This includes the annual renewal of business licenses, releasing of statement of assets and liabilities and payment of appropriate taxes.
We have counselled a number of small, medium and even large corporations and limited liability companies on maintaining the proper corporate formality. The result is that assets of the organization and that of the stockholders are protected. Corporations and limited liability companies are established primarily so that the personal assets of their stockholders and incorporators can be protected. We can advise you (as we have advised our clients’) to maintain transparency vis-a-vis the State of California.
Rather than a corporate veil, you can build a corporate wall providing a haven of security to your stockholders. Call our San Diego Business Lawyers today to schedule a consultation.
WEBB & BORDSON, APC
466 W. Fallbrook Avenue, Suite 102
Fresno, CA 93711
Phone: (559) 431-4888
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