Piercing the Corporate Veil in Chicago: Breaking Down the Basics
Piercing the corporate veil is a legal concept intended to hold business owners accountable for the actions of their businesses3 min read
Piercing the corporate veil is a legal concept intended to hold business owners accountable for the actions of their businesses. In Chicago, understanding laws that pertain to the issue is essential for business owners who wish to remain protected from personal liability. This article will provide a comprehensive overview of how to getstarted on piercing the corporate veil in Chicago and what legal counsel skilled in local law is essential to ensure a business can adequately protect its interests.
The corporate veil is a legal construct that separates the identity of the business entity from its owners. Generally, this means that the business’s owners can be protected from personal liability for acts committed by the business. This veil of protection, however, is not absolute and there are circumstances that allow an individual to look beyond the corporate veil, or “pierce the corporate veil.”
Piercing the corporate veil is a legal process used when a creditor or plaintiff attempts to access the assets or profits of a business owner as repayment or compensation for a debt or damages owed by the business. It is a process that allows a creditor or plaintiff to seek relief from the owner of the business, rather than the business itself.
Courts in Chicago do not take lightly to piercing the corporate veil. Courts in the city recognize that business owners often use the corporate structure to protect themselves from liability and will require high—often overwhelming—standards of proof to pierce the corporate veil in the city.
To pierce the corporate veil in Chicago, a creditor or plaintiff must present evidence that the ownership of the business in question disregarded the legal distinction between the business and its owner. The creditor or plaintiff must also show proof of bad faith, fraud, or negligence on the part of the business’s owners. This evidence is required for the court to conclude that the business in question is, in fact, the alter ego of the business’s owners.
Because the legalities associated with piercing the corporate veil can be complex, it is important for a business owner to seek counsel from a business attorney that can provide an understanding of the laws that govern the enforceability of the veil in Chicago. Only a skilled legal counsel with experience in local law can ensure that a business is fully protected from personal liability in the city.
In Chicago, there are several areas in which a business owner must pay close attention to ensure that the corporate veil is not pierced by a court or creditor. These include:
• Ensuring that all the proper legal paperwork is filed and the processes are followed
• Making sure the business entity is adequately separate from its owners, such as by filing appropriate state paperwork and ensuring compliance with the local government
• Maintaining appropriate records and financials for each operating business
• Operating the company and its associated entities in full compliance with both local and state laws
• Establishing a separate and distinct board of directors for each operating business entity and ensuring its compliance with local corporate laws
By taking all the appropriate legal steps, a business owner in Chicago can significantly increase the chances of preventing the piercing of the corporate veil.
Piercing the corporate veil is an intricate process in Chicago, and understanding and implementing the appropriate laws is key to protecting against personal liability for a business. The process requires the assistance of an experienced business attorney that is familiar with local laws and regulations to ensure that a business is properly set up and maintained to protect against the piercing of the corporate veil. UpCounsel provides access to high quality attorneys on demand that can guide Chicago business owners through the complexities of the legalities of piercing the corporate veil.