Know Your Debtor - Corporations or Limited Liability Company

Officers and directors of corporations, and members of LLC's, are personally liable only if they have personally guaranteed the corporation's obligations, personally committed negligence or some other tort, or through alter ego or other theories that will "pierce the corporate veil".

The factors to consider when attempting to pierce the corporate veil include the following:

• Is the company undercapitalized?
• Did the company observe corporate formalities?
• Did the company maintain company records?
• Did the company pay dividends?
• Did the company permit siphoning of funds by principals of the company?
• Would observation of the company entity promote injustice?

If it can be determined that the answers to these questions are in the affirmative, it is possible to pierce the corporate veil and make the principals of the company personally liable for what would otherwise be company debts.