In order to take advantage of corporate liability protections, the owner must comply with certain requirements. Failure to do so will result in the opposing side piercing the corporate veil and gaining access to the corporate owner's personal assets
Three tips for maintaining the corporate veil
1. Do not commingle your assets with those of your corporation. Do not make personal purchases with corporate funds.
2. Hold yourself out to the public as a corporation. Your website, business cards, contracts, advertising must give adequate notice that you are a corporation and not a sole proprietorship.
3. Make sure that you have purchased adequate and reasonable insurance to cover typical perils associated with your business.
Using fraud to pierce the corporate veil
The Arizona Consumer Fraud Act defines fraud very broadly. "A. The act, use or employment by any person of any deception, deceptive or unfair act or practice, fraud, false pretense, false promise, misrepresentation, or concealment, suppression or omission of any material fact with intent that others rely on such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise whether or not any person has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice." As you can see, just about any misrepresentation or concealment can fall within the definition of consumer fraud. The corporate veil was not meant to protect you from allegations of fraud. You cannot commit a fraud upon the public and then hide behind the corporate veil. To protect your personal assets as well as your corporate reputation make sure that your dealings with the consuming public are above reproach and do not violate the Arizona Consumer Fraud Act.
Additional resources provided by the author
For more information you may review the AZ Consumer Fraud Act at A.R.S. s. 44-1522.
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