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What specific things need to be done for a Sub s Corp to maintain the protection of the Corp veil?

Alpharetta, GA |

Also what defines co mingling of assets? Does an owner or an owners spouse loaning money or allowing the corporation to use personal credit cards to hold balances for company expenses and allowing the company to make the payments constitute co mingling? If so is this enough to pierce the Corp veil and put the uninvolved spouse at risk?

Attorney Answers 2

Posted

The prior answer offers good advice. Here are a few additional thoughts.

When operating in the corporate arena, it is important to know what "hat" you are wearing at any one time. Are you making a decision as an owner or as a corporate officer carrying out tasks?

Keep in mind that a corporation or LLC can only operate through their agents. So it is good to keep records or minutes that reflect what decisions were made and what authority a corporate officer was granted. If you are going to loan money to your corporation, then best to create a promissory note assessing a reasonable interest rate. Best to keep the corporation's funds separate from that of the owners. If you want the protection of limited liability you have to be willing to respect the integrity of the entity.

LEGAL DISCLAIMER: Please note that this comment does not constitute legal advice nor has an attorney-client relationship been created.The law may vary depending on the state in which you reside or the jurisdiction where the activity took place. This comment is intended only to give some direction in which to seek further guidance. If you think my post was helpful, please check the thumbs up tab located below.

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Posted

First, from a legal stand point, GA doesn't recognize the difference between an S-Corp or C-Corp. S-Corp and C-Corp designations are for IRS tax purposes. In GA, a corporation whether S or C class must keep corporate formalities such as keeping corporate minutes and elections, being adequately capitalized, and maintaining the corporation as a separate entity by doing things such as maintaining a separate account. There is also what is known as a statutory close corporation that isn't required to keep the same corporate formalities as a regular Georgia corporation but that is another discussion.

Commingling assets means that there is no distinguishable difference between the ownership and control of an asset. As an example, if you are doing business through your personal bank account by accepting payments from customers through your personal account, you are commingling your personal funds with your business funds. Such would be an example of commingling and a reason to ask a court to pierce the corporate veil of a business entity.

Whether someone can pierce the corporate veil of a company is a highly factual question that requires legal research. If you believe that your may be personally subject to litigation due to the Plaintiff attempting to pierce the corporate veil, you must hire a corporate litigator NOW.

The aforementioned opinion does not constitute legal advice and is for informational purposes only. See an attorney licensed in your jurisdiction for competent legal advice.

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Posted

Thanks so much for all of the detail!

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