Piercing the Corporate Veil

Written By Thomas Horgan – Piercing the corporate veil is a legal concept that allows a court to hold the owners of a corporation personally liable for the actions of the corporation. This can be a powerful tool for creditors and other individuals who have been wronged by a corporation, as it allows them to seek compensation from the individuals who are ultimately responsible for the actions of the company. In Nebraska, piercing the corporate veil is not a straightforward process, and it requires a careful analysis of the specific circumstances of the case.

Piercing the Corporate Veil

Nebraska corporate law is the body of laws that govern the formation and operation of corporations in the state of Nebraska. These laws set out the rules and procedures for forming a corporation, electing directors, issuing stock, and other important aspects of corporate governance.

Limited Liability Company (LLC)

One of the key features of Nebraska corporate law is the concept of limited liability. This means that the owners of a corporation, known as shareholders, are not personally liable for the debts and obligations of the corporation. Instead, the corporation itself is responsible for paying its debts and fulfilling its obligations. This provides a degree of protection to the shareholders, as they cannot be held personally liable for the actions of the corporation.

Forming a Corporation – Articles of Incorporation

In order to form a corporation in Nebraska, an individual or group of individuals must file articles of incorporation with the state. The articles of incorporation must include certain information, such as the name of the corporation, the purpose of the corporation, the names and addresses of the incorporators, and the number and types of shares of stock that will be issued. Once the articles of incorporation are filed and approved, the corporation is considered to be legally formed.

Rules and Procedures

Once a corporation is formed, it is required to follow certain procedures and rules in order to remain in good standing. This includes holding annual meetings of shareholders and directors, keeping accurate records and financial statements, and following the provisions of the corporation’s bylaws. Nebraska corporate law also requires corporations to issue stock to shareholders and to follow certain rules when issuing, transferring, or buying back stock.

In addition to the rules and procedures that apply to all corporations in Nebraska, there are also specific laws that apply to certain types of corporations. For example, nonprofit corporations, which are formed to pursue charitable or educational purposes, are subject to different rules and procedures than for-profit corporations.

Piercing the Corporate Veil in Nebraska

In order to pierce the corporate veil in Nebraska, a creditor or other individual must first establish that the corporation is a “alter ego” or that it is being used to commit fraud or to perpetuate wrongdoing.

This can be difficult to prove, as it requires a detailed examination of the inner workings of the corporation, including the level of separation between the owners and the company and the degree to which the owners have used the company to shield themselves from liability.

In addition to showing that the corporation is an alter ego or that it is being used to commit fraud, the creditor or other individual must also demonstrate that the owners of the corporation have engaged in “gross disregard” for the rights of the creditor or other individual.

This requires more than just negligence or carelessness on the part of the owners; it requires a clear and intentional disregard for the rights of others.

Important Considerations

One important factor that the courts in Nebraska will consider when deciding whether to pierce the corporate veil is the level of separation between the owners and the corporation. If the owners have failed to maintain a clear separation between their personal and business affairs, it may be easier to pierce the corporate veil.

This can include things like commingling personal and business funds, failing to maintain separate bank accounts, and using company assets for personal gain.

Another factor that the courts may consider is the degree to which the owners have used the corporation as a shield to protect themselves from liability. If the owners have used the corporation to avoid paying debts or to evade taxes, for example, this may be seen as a gross disregard for the rights of creditors or other individuals and could make it easier to pierce the corporate veil.

It is important to note that piercing the corporate veil is not a routine or automatic process in Nebraska. The courts will carefully consider the specific circumstances of each case, and they will weigh the various factors that are relevant to the issue of personal liability. In general, the courts will be more likely to pierce the corporate veil in cases where there is clear evidence of fraud or wrongdoing on the part of the owners of the corporation.

Have you been wronged? Hire an Experienced Omaha Attorney

If you are a creditor or other individual who has been wronged by a corporation and you are considering seeking to pierce the corporate veil, it is important to consult with an experienced attorney. An attorney can help you understand your rights and options under Nebraska law and can represent you in court if necessary.

While piercing the corporate veil can be a powerful tool for holding the owners of a corporation accountable, it is not always easy to do, and it requires a careful analysis of the specific circumstances of the case.

Horgan Law Firm, P.L.L.C. | Omaha, NE

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