What Does Piercing the Corporate Veil Mean?

Many people incorporate their businesses in order to avoid becoming personally liable for the company s losses. When a business is incorporated, owners and shareholders cannot lose more than the money they invested into the business. If the company is not incorporated, but instead is operated as a sole proprietorship or partnership, the business owners could become fully responsible for covering the organization s financial losses. For example, if a partnership went bankrupt or was sued, the partners who own it could be held personally liable for paying for the partnership s debts or the judgment against the organization. The liability protection of a corporation is extremely important, but it is not always absolute. Piercing the corporate veil means that the distinction between the owners and the business is stripped away. The owners become personally responsible for the financial condition of the business, just as they would be if the company was a sole proprietorship. Piercing the


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