People conduct business through business entities like limited partnerships, limited liability companies, and corporations to shield them from personal liability for the debts of the corporate entity. In Virginia, the law recognizes the distinction (the “legal fiction”) between a corporate entity and its individual shareholders. The corporate shareholders or owners are viewed by the law as separate legal entities from the business organization. Therefore, if a person is owed money by a corporate entity, the person cannot ordinarily turn to the individual shareholders (owners) and ask them to pay the debt. Only the corporate entity is responsible for paying the debt.
One of the most unfortunate situations arises when a business entity harms another person or business and, yet the entity is “judgment proof” because it lacks enough assets or insurance coverage to pay.
The Supreme Court of Virginia has recognized that, in certain situations, the corporate veil (in other words, the legal distinction between a corporate entity and its owners) may be disregarded, and the owners themselves may be held personally responsible (liable) to pay the debt. And here at The Mottley Law Firm, we have a practice area dedicated to “piercing the corporate veil.”
What must one prove to pierce a corporate veil and hold the entity’s owners personally liable for a wrong? It is not an easy thing to do. For starters, the law in Virginia, as elsewhere, strongly favors recognizing the distinction between a corporation and its owners. But when it is obvious that the corporate entity is simply being used to perpetrate wrongs, such as frauds, and is wrongfully being used to shield people from liability for engaging in wrongful conduct, the veil can be successfully pierced.
This is a complicated area of the law, and these cases are very difficult to win. However, if you believe that you, or your business, have been the victim of wrongful conduct being perpetrated by a sham business, you owe it to yourself to consult with an experienced attorney in this area of the law.
Here at The Mottley Law Firm, we have many years of experience in this area, and would be glad to speak with you about your situation. Please reach out to us for a consultation by calling the number on this website, filling out one of the contact forms here, or chatting with one of our representatives in the chat box on this website.