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Normally, creditors can reach only a corporation's/LLC’s (“Entity”) assets and not the personal assets of the owners of the Entity. This shielding effect is known as the “corporate veil”.

Sometimes, however, claimants will attempt to "pierce the corporate veil" and reach the personal assets of the Entity’s owners.

Recently, the local appeals Court issued a decision that reiterates that the corporate veil is not impenetrable. Azte, Inc. v. Auto Collection, Inc., 124 A.D.3d 811 (2d Dep’t 2015).

Maintaining the “corporate veil” is a process that business owners can start themselves. These steps should be taken even if the business has a single owner.

Issuing Stock/Membership interests - Businesses should actually issue shares/membership interests to each of the owners.

Formulate and Observe By-Laws/Operating Agreement – At formation, businesses should formulate and approve by-laws. These by-laws should be observed throughout the life of the Entity.

Appointing Directors/Managers and Holding Meetings - Directors/managers make major policy decisions for the Entity. Owners can choose directors/mangers at a shareholder’s/members meeting.

Maintain Business Bank Accounts and Credit Cards – It is imperative that separate business accounts and credit cards are maintained. Personal funds and business funds should never be co-mingled.

For more information on this or other legal issues facing business and how to navigate or litigate through them please contact Judith Bachman, Esq. at or 845-639-3210.


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