Piercing the Protective Corporate Veil Part 4: Factors 10-11

The last post briefly analyzed the seventh, eighth and ninth of eleven factors that courts rely upon when determining whether an entity is merely an alter-ego of another entity or individual.  in this post, we will explore the final two factors:

10) Failure to maintain arm’s-length relationships

This factor is given substantial weight by Illinois courts.  Essentially, if a company is receiving a benefit that it cannot obtain on the open market because of an improper relationship, courts may heavily rely upon this factor in deciding to pierce the corporate veil.

11) The corporation is a facade for the dominant stockholders

This is an all-encompassing factor used by courts.  This factor allows courts to pierce the corporate veil even if some of the above factors are not met.

This post is not intended to be legal or tax advice.  Formeller & Formeller LLP’s Chicago startup attorneys have helped numerous clients form their businesses.  Our skilled Chicago attorneys can help counsel you on avoiding personal liability for your corporation or other limited liability entity’s actions.  Please contact our law firm today for a free legal consultation if you would like to discuss a new business venture or business ownership.

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