Avoiding Piercing of the Corporate Veil - Best Practices

Source: The Legal Brief

Basically, the "corporate veil" refers to how doing business through a legal entity, such as a corporation, limited liability company or limited partnership can limit the legal obligations and debts to the entity itself rather than imposed upon its owners or affiliated companies. Courts "pierce" that corporate veil, however, and extend liability to owners or affiliated entities where the formalities of the entity are not followed and the result effectuates some fraud or other unfair wrongdoing to those with whom the entity has dealt.

There are two basic prongs that the courts apply to effectuate the veil piercing: "In order to pierce the corporate veil, a plaintiff must show [1] that the dominant corporation exercised complete domination and control with respect to the transaction attacked, and [2] that such domination was used to commit a fraud or wrong causing injury to the plaintiff (see Matter of Morris v New York State Dept. of Taxation & Fin., 82 NY2d 135, 141 [1993]).” Fantazia Intl. Corp. v CPL Furs N.Y., 67 AD3d 511, 512 [1st Dept 2009]).

Read the full article in the Fall 2026 edition of The Legal Brief here.

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Kevin Schlosser is a Shareholder and Chair of the Litigation and Alternative Dispute Resolution Department at Meyer, Suozzi, English & Klein, P.C. He handles complex commercial litigation, is on the Roster of the AAA National Panel of Commercial Arbitrators, serves as outside general corporate counsel, and is author of the New York Fraud Claims Blog, www.nyfraudclaims.com.

The Legal Brief is the official publication of the Suffolk County Bar Association, www.scba.org.