INTEGRITY. SOLUTIONS. RESULTS.

VIDEO: The Corporate Veil – Georgia Car Law Authority

Documents aren’t enough. Operate the right way.

When operating your business, it is critically important that you separate business activities from personal activities.

In the video below, we discuss how to do that and why it is so important.

Don’t make the mistake of using business resources for your personal benefit.

Below is a transcript of the video:

Now we’re going to talk about something very interesting in the law, and that’s the corporate veil. I’ve mentioned this already in a video or two in the Georgia Car Law Authority program, but now is the perfect time to talk about exactly what that is. The corporate veil is what protects the owners of a company from individual liability in the event of a company’s wrong. Let me explain what that means because that’s a full semester of law school in one sentence.

Corporate Veil

The corporate veil protects the owner of the company in the event that the company is found guilty of doing something it shouldn’t have. If the company does something wrong, for example, a dealer doesn’t disclose something to a customer that it should have disclosed because the dealership is a registered limited liability company that maintains proper corporate form, is registered, and has an operating agreement like I talked about in a previous video.

That means that the owner of the business or owners of the business will not also be liable. In a corporate structure, the way that works in the corporate veil specifically, is that the owner won’t normally be held liable for the acts of the company.

Like all laws, there are exceptions. One of the major exceptions is if the company is not maintaining what we call the corporate form, what that means is that the company is not separating company purchases from personal purchases. The owner is using the company and the company credit card as the owner’s personal piggy bank, buying groceries, going on vacations, paying for their kid’s tuition all out of the company bank account. If the owner is doing that, the owner may not be protected by the corporate veil.

That is the most common scenario where the corporate veil is what we call “pierced”. Another way is if the owner directs the company to commit fraud. If the owner directs, instructs, or conducts a fraud that is hidden by the company for the owner’s benefit, the owner could be personally liable for that fraud, even though the company was the one that did the fraud.

So that’s the corporate veil. That is why it’s really important to maintain corporate form, corporate structure, have the right corporate documents, and register the business. When you’re operating this kind of a business, there’s a lot of risks. There’s a lot of risk in operating a

business in the car space, especially a car dealership. It’s super important, very important to maintain the corporate form so that the corporate veil cannot be pierced.

For more videos on the Georgia Car Law Authority series, please visit www.georgiacarlaw.com.

For more information and to book a strategy session, click here!