McBride Law Blog

BLOG

Category Archives: Choice of Entity

When a Corporation Fails To Exist (Legally) (Part II)

October 13, 2016

De Facto Corporation

Cantor v. Sunshine Greenery, Inc., a 1979 case out of New Jersey, is one of the best known cases on the doctrine of de facto corporation.[1]  In that case, Cantor was the landlord and Sunshine Greenery the tenant.  On December 16, 1974, Cantor prepared the lease naming Sunshine Greenery as the tenant, which was signed by Brunetti as president of Sunshine Greenery.  Cantor knew that Brunetti was starting a new corporation but did not request a personal guarantee from Brunetti. … Read the rest

When a Corporation Fails To Exist (Legally) (Part I)

October 6, 2016

We advise and write frequently on personal liability of business owners.  Certain entity forms, such as corporation and limited liability company (LLC), generally offer protection from personal liability for business owners.  Although we discussed in our previous blog series “LLC Law Update: Piercing the Corporate Veil” situations where courts “pierce the corporate (or LLC) veil” to hold business owners liable for business debts, veil piercing is more of an exception than the norm for properly formed and operated entities. … Read the rest

Shawn McBride Talks About Business Partnership in a Podcast Interview with My Time Is Now

June 21, 2016

What’s Love Got To Do with Business Partnerships and Business Laws.

On June 21, 2016, Shawn will be featured in a podcast interview with Charlene Gilman, a producer of a weekly podcast titled “My Time Is Now” that airs every Tuesday with a worldwide audience covering United States, South Africa, and Australia.  In this interview, Shawn talks about how business partnerships can quickly go sideways when business laws are ignored during business changes and shares some tips on keeping business partnerships healthy and successful. … Read the rest

LLC Law Update: Piercing the Corporate Veil (Post 6)

March 1, 2016

We have looked at the laws governing veil piercing in New York, Wyoming, Texas, and Maryland.  Veil piercing is available in most other states in varying degrees, but it bears repeating that limited liability is the rule and piercing is the rare exception to be applied only in cases involving exceptional circumstances.[1]  The cases we discussed here are merely a snapshot of veil piercing laws in different states and examples of situations where courts allowed veil piercing, not necessarily indicative of that particular state’s business-friendliness, as veil piercing is highly fact-intensive. … Read the rest

LLC Law Update: Piercing the Corporate Veil (Post 5)

February 25, 2016

Maryland.

In recent years, Maryland has become one of the most difficult states in which to pierce the corporate veil, with a success rate at about 25.81%.[1]  This is an interesting reversal, given that the state had a relatively liberal 40% rate until 1986.[2]  Under Maryland law, where there is no allegation of fraud, a court may still disregard the corporate entity and establish personal liability to enforce the so-called a “paramount equity,”[3] but this seems to be a pretty tough standard to meet.… Read the rest

LLC Law Update: Piercing the Corporate Veil (Post 4)

February 18, 2016

Texas.

In Texas, veil piercing is in large part governed by the statute.  Specifically, a shareholder is not liable to the corporation or its creditors with respect to, among other things, contractual obligations of the corporation on the basis that the shareholder was the alter ego of the corporation or on the basis of actual or constructive fraud, a sham to perpetrate a fraud, or other similar theory.[1]  As in Wyoming, a shareholder is also not liable for the corporation’s failure to observe any corporate formality, including the failure to comply with the statute or the certificate of formation or bylaws of the corporation.… Read the rest

LLC Law Update: Piercing the Corporate Veil (Post 3)

February 11, 2016

Wyoming.

Wyoming courts allow veil piercing in about 61.90% of cases, far exceeding the national average, though the small size of the dataset (21) makes it difficult to say that the rate is statistically meaningful.[1]  In Wyoming, veil piercing law was also modified by statute around the time this number came out, so that failure of an LLC to observe any particular corporate formalities is no longer a ground for imposing liability on the members or managers for the liabilities of the company.… Read the rest

LLC Law Update: Piercing the Corporate Veil (Post 2)

February 4, 2016

New York.

According to a 2010 study of a dataset of 2908 cases from 1658 to 2006, New York courts allow veil piercing in about 49.81% of cases and is among the most prominent producers of veil piercing cases.[1]

In Agai v. Diontech Consulting, Inc.,[2] a recent case, a creditor sought to pierce the veil of a corporation, arguing that the principals operated the consulting business without corporate formalities for their own unjust enrichment and to avoid the judgments obtained by the creditor. … Read the rest

All postings are intended to be planning tools to familiarize readers with some of the high-level issues discussed therein. No posting is intended to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.