In today’s Freedom Friday blog and email newsletter, I want to talk about another topic that I wish more prospective clients would ask me about, and that’s alter ego, also known as piercing the corporate veil. Before we go any further, you might be asking, “What’s alter ego?” A better question would be, “How can Batman prevent people from knowing he’s really Bruce Wayne?” or “How can Superman prevent people from knowing he’s really Clark Kent?” In today’s Freedom Friday blog and email newsletter, I’m talking about how to avoid alter ego in 2025.
In Oklahoma, the alter ego doctrine is also called piercing the corporate veil. The corporate veil is the legal separation between a business and its owners (this works in both an LLC and a corporation). It’s what should protect your house, savings, and personal income if your business is sued, so long as you have not signed a personal guaranty, which can make you personally liable, as well. However, this protection is not bulletproof, depending on your conduct, and not just paperwork or documentation.
Depending on various factors, courts can pierce the corporate veil. Business owners can be held personally liable if the business is just an “alter ego,” with no real separation, there’s commingling of personal and business funds, business formalities are not maintained, and because of fraud or misue of the business entity.
Piercing the corporate veil can be avoided, though, by maintaining separate bank accounts, signing contracts on behalf of the entity and not yourself, documenting major decisions, filing annual reports and following state requirements, and avoiding using business funds for personal piggy banks. Also, you need to avoid several red flags which can trigger veil piercing, including unpaid payroll or sales taxes, no written operating agreement or corporate bylaws, personal guarantees on business loans, and mixing (or commingling) business and personal income or expenses.
Thinking about starting a small business? Or maybe your small business is having issues with contracts, leases, business partners, collection issues, or experiencing other barriers to growth? Please contact me at Jonathan@libertylegalok.com to schedule a FREE strategy session.
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