Piercing the Corporate Veil of a Limited Liability Company
What this means is that under certain circumstances your LLC will not afford protection to you if a creditor can establish that your LLC is a sham.At least one court in Connecticut in 2001 (Stone vs. Frederick Hobby Associates LLC) ruled that it may pierce the corporate veil and hold members personally liable for wrongs done to third parties. The facts in that case were particularly egregious. An effort in Wisconsin to do the same has failed. New Horizon Supply (co-op case in 1999.)
The following suggestions are made:? Carefully observe the State Statute formalities
? Establish a clear and separate identity for your LLC a part from you as a member or members. That is include a separate office, stationary, books and assets
? Clearly designate and name the LLC as the entity entering into and executing business agreements, contracts and other documents
? Avoid intentional under capitalization of your LLC
? Make no assurances or representations as an LLC member as to the financial strength of your LLC
? Do not dare someone else dealing with your LLC to sue it by asserting "that my LLC doesn't have any money or assets that you can reach and that is the reason why we formed it."