How Do You Prove Your Alter Ego?

The factors are very important in proving alter ego. Are we talking about a company that has not paid its employees? That may garner greater sympathy than if we are talking about someone who is claiming damages for a breach of contract. Did the company have a foreseeable risk? A cheese company choosing not to buy insurance when there is the risk of bacteria in their food would lend itself to an alter ego situation. If the company has chosen not to buy insurance, that is often a factor that indicates to the court under-capitalizing or exposing the public at large to a risk that is unacceptable.

Under-capitalization doesn’t apply in all circumstances because, let’s face it, if a building collapses, it’s going to cause so much damage and injury, who could foresee the amount of insurance one would have to have? When the World Trade Center came down, there were lots of lawsuits about whether the owner of the building had procured enough insurance, whether the insurance companies were responsible for all of the different injuries to firefighters, and so forth. That becomes a whole complex analysis. Suffice to say, under-capitalization is one factor.

Another factor is whether the corporation has gone through and complied with all of the formalities, such as properly getting business licenses and upgrading or updating all of their equipment. If there is a failure, for example, of a roller coaster company that may not have had their roller coasters inspected for years at a time, not complying with the law would play an important role.

What Can An Attorney Do To Assess My Company’s Issues Of Piercing The Corporate Veil?

Again, we are going to look at what lines of business the company is engaged in and, for those lines of business, whether it has insurance. Does a construction company maintain workers’ compensation insurance? Not having workers’ compensation insurance would become a very serious problem for the company if an employee were to get seriously injured.

Beyond the required kinds of insurance, what kinds of foreseeable risks are there? A cheese company would need to investigate possible risks and obtain insurance against things like bacteria, spoilage, or anything else that could cause members of the public to become sick or even die as a result of getting a bad batch.

And finally, we’ll look to see if the company is adequately capitalized to meet its regular bills and obligations. Looking at its history, has it previously been sued for these kinds of things? Did it have insurance? Did it have adequate provision for the potential for having to pay out settlements or losses? These are some of the things that I, as a business attorney, would assess when helping advise a company on how to avoid a disastrous situation.

How Do I Determine How Well My Legal Entity Will Protect Me From Personal Liability?

First, do all of the things that you need to do to comply. File all of your required statements of information, registrations, and renewals; obtain all of the licenses you need to conduct business. Then, we are going to look through what types of risks the business is typically going to encounter and what kinds of claims can be made by members of the public, or even by other businesses using your goods and services. Lastly, we will look at capitalization: how much money is in the company? Is it able to meet its obligations? Is it retaining enough earnings to meet unexpected bills or purchase new equipment or deal with potential claims? These are all the kinds of things that we would want to assess. There’s not one, single answer for all customers.

For more information on Proving Your Alter Ego in the State of CA, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (310) 477-7767 today.