Incorperating LLC or S Corp.?

Basis for piercing the veil

In the United States, corporate veil piercing is the most litigated issue in corporate law (See ROBERT B. THOMPSON, Piercing the Corporate Veil, an Empirical Study, 76 CORNELL L. REV. 1036, 1991). Although courts are reluctant to hold a director or active shareholder liable for actions that are legally the responsibility of the corporation, even if the corporation has a single shareholder, they will often do so if the corporation was markedly noncompliant, or if holding only the corporation liable would be singularly unfair to the plaintiff. In most jurisdictions, no bright line rule exists and the ruling is based on common law precedents. In the US, different theories, most important "alter ego" or "instrumentality rule", attempted to create a piercing standard. Mostly, they rest upon three basic prongs - namely "unity of interest and ownership", "wrongful conduct" and "proximate cause". However, the theories failed to articulate a real-world approach which courts could directly apply to their cases. Thus, courts struggle with the proof of each prong and rather analyze all given factors. This is known as "totality of circumstances".
There is also the matter of what jurisdiction the corporation is incorporated in if the corporation is authorized to do business in more than one state. All corporations have one specific state (their "home" state) to which they are incorporated as a "domestic" corporation, and if they operate in other states, they would apply for authority to do business in those other states as a "foreign" corporation. In determining whether or not the corporate veil may be pierced, the courts are required to use the laws of the corporation's home state. This issue can be significant, for example, the rules for allowing a corporate veil to be pierced are much more liberal in California than they are in Nevada, thus, the owner(s) of a corporation operating in California would be subject to different potential for the corporation's veil to be pierced if the corporation was to be sued, depending on whether the corporation was a California domestic corporation or was a Nevada foreign corporation operating in California.
Generally, the plaintiff has to prove that the incorporation was merely a formality and that the corporation neglected corporate formalities and protocols, such as voting to approve major corporate actions in the context of a duly authorized corporate meeting. This is quite often the case when a corporation facing legal liability transfers its assets and business to another corporation with the same management and shareholders. It also happens with single person corporations that are managed in a haphazard manner. As such, the veil can be pierced in both civil cases and where regulatory proceedings are taken against a shell corporation.
Factors for Courts to Consider

• Significant undercapitalization of the business entity (capitalization requirements vary based on industry, location, and specific company circumstances)(starting up on a shoestring with a leased truck and credit cards then running it into the dirt collecting "profit" until the truck is repossed or quadrupling your prebankruptcy salary to whatever is left)
• Failure to observe corporate formalities in terms of behavior and documentation (voting and recording minutes)
• Intermingling of assets of the corporation and of the shareholder (shared home/office and using corporate money for personal expenses)
• Treatment by an individual of the assets of corporation as his/her own (mom running the kids to practice in the corporate mini-van, raiding the piggy bank at Christmas, mailing personal letters with company stamps or hanging an A-corp sign out front of the house and then remodeling.)
• Failure to pay dividends
• Siphoning of corporate funds by the dominant shareholder(s) (new boat in your garage in addition to your normal payday or early prepayment of the family home mortgage because the corp had a "good year")
• Non-functioning corporate officers and/or directors 9 year old frankie jr. tossing 4k into his college fund one year for washing the truck as the director of shiney paint or 22 year old sally getting paid 14k as treasurer while she is in college across the country.
• Concealment or misrepresentation of members
• Absence or inaccuracy of corporate records (not paying an attorney to maintain corporate records "about a grand a year" or not paying a cpa to manage corporate finances "about 3500 a year")
• Was the corporation being used as a "façade" for dominant shareholder(s) personal dealings; Alter Ego Theory (deadheading home empty with loads of stuff for the wife's other business is not a tax deduction or reason for bankruptcy on your part.)
• Failure to maintain arm's length relationships with related entities (see above- - and no, you can't be the president of the shipping, trucking, and receiving companies. Nice try but this would still be one company and you can't sue yourself for punitive damages.)
• Manipulation of assets or liabilities to concentrate the assets or liabilities (you can't bundle all the bills up in "A-corp" and sell the paid off truck to "B-corp" for $500 then declare "A-corp" bankrupt.)
• Other factors the court finds relevant

It is important to note that not all of these factors need to be met in order for the court to pierce the corporate veil. Further, some courts might find that one factor is so compelling in a particular case that it will find the shareholders personally liable.

 

Please tell me, by proving legally:
*that the corporation and its officers can't be sued.
*how incorporating shields you when you are the CEO of said corp and also the driver who was in the accident.
*how it also shields you from being sued individually outside of a corp lawsuit. ie...how you are freed from being personally responsible.
*how a corporation will keep the lawyers from suing the carrier, the driver, and the owner of said vehicle.

 

he can't because there is too much case law to the contrary. Courts make decisions based on past court decisions (case law). This legal case law research is what my wife does for a living. I was shown this when I was discussing it with the lawyer. Of course I no loger have them, I could get my wife to research them again but she's liable to kill me if I do. And personally I don't really care. I know what I'm doing

 

et all...

When the veil is pierced (corporate officers held personally liable) it is done so through their own inattention to detail. Every case you can cite where the veil was pierced will show this to be true. This is a fact.

A corporation is a shield and will provide limited liability for owners. Failure to follow corporate formalities may cause the owners to lose their protection and be found personally liable for corporate obligations. "Piercing the corporate veil" refers to imposition of liability on the owners for corporate responsibilities. This is also referred to as the "alter ego doctrine": if an owner treats the corporation as an extension of himself (rather than as a distinct and separate entity by following corporate formalities), he is personally responsible for corporate liabilities. This also is a fact.

Driver employees may be held personally liable. For this to occur they must be found negligent. No exceptions and this is a fact.

My position is if you are not stupid this will not happen to you.

Earlier on this point, the following criticism was they'll check your logs. Mine are legal, I keep them current, I don't cheat and I don't need to. My log is a part of my defense.

I do my inspections and am attentive within the range of my training. My truck is repaired by certified mechanics at the dealership.

I have no clue what your next shotgun defense of your possition will be but basically it will always come down to you did something wrong and left yourself open to liability.

This could be something as simple as opening your mouth at the scene of an accident instead of saying my attorney is on the way and he will speak for me as I've been instructed by my company to make no statements without council present.

Can anyone show an example of piercing the veil when everything was done correctly? No, because if you follow the law it will protect you.

 

et uh yeah.

I guess I don't talk to geeky people who sell corporations and such, willing to tell me whatever they can such as "hey, Screw up, yer fine!" in order to make some money off of me and make me believe that Im a member of the untouchables because I have a corporation.

What I do know is that from a vast majority of the people that have talked about their own corporations in regards to the trucking biz, they point out the simple fact that it does NOT protect you (they point this out because they learned so after the fact), and that it was an extremely poor decision to form a corporation.

Here is something, become a member of kevin rutherfords website at kevinonxm.com...start a thread about the positives that you think exists and the viel or whatever, and see your theories shot down by those who have corporations and those who have done the legal research into such formations.

 

Nobody is perfect. well apparently nobody but you.

Logs aren't perfect. if somebody wants to find something they will.

you can inspect your truck every 20 minutes but it comes down to your wrd and the public is so anti truck that what do you think they will say when they are sitting in the jury box? right or wrong, the law is open to interpretation and heavily swayed by societal prejudices.


QUOTE:

This could be something as simple as opening your mouth at the scene of an accident instead of saying my attorney is on the way and he will speak for me as I've been instructed by my company to make no statements without council present.


This makes me giggle... lol. My attorney gets $400 an hour. I'd hate to see your attorney bill when you are from new york and you nail some 4 wheel in Vegas and he comes to "speak for you"

 

Accident attorney's are available all across the country, but quite frankly, If I'd just wiped out a four wheeler, in all likelyhood, in the end I'd save money by flying the attorney out first class plus $400 an hour for his time.

I'm not an accident investigator or an attorney and therefore not qualified to answer questions or make accident reports or statements which could possibly incriminate myself or leave me or my company liable for millions in med bills.

I was taught that by transport america and its stated in their accident kit on the back of every log book they issue.

Its corporate common sense, don't hand the prosecution anything.

CYA... that fender bender will turn into severe debilitating back injury as soon as the 4 wheeler driver starts seeing $ signs.