Is An Alter Ego Hiding Assets From Your Personal Injury Judgment?

Corporations are granted status as a separate entity from their shareholders for many good reasons. However, some individuals misuse corporate laws to shield themselves from personal financial responsibility. 

If the at-fault party in your personal injury lawsuit has done this, can you overcome the obstacle they placed in your way? The answer may be yes. Here's how you can pierce the corporate veil to access assets you need in order to be made whole. 

What Is a Corporate Alter Ego?

An alter ego refers to a corporation that is not actually a separate entity from its shareholders. The separation is on paper only, and the owner or owners treat it as an extension of themselves. 

For instance, consider a tenant who was injured in their apartment building. The building is owned by a corporation whose only asset is that building. There is no equity in the building, though, so the corporation cannot pay the damages awarded. 

The injured tenant then discovers that the corporation has one shareholder who owns several other buildings which have plenty of equity to draw from. But they cannot access that other equity unless they can prove that the shareholder is improperly shielding themself from financial liability. 

How Do You Prove an Alter Ego? 

Essentially, you must demonstrate two key things to prove that a company is simply an alter ego. 

The first is that the person or other organization treated the company's assets like they belonged to them personally. They may have mingled business and personal income together or paid personal expenses from business funds. Often, they fail to follow corporate rules, including holding regular meetings. Or they may transfer assets and debts between the person and the corporation without proper accounting. 

Second, there must be evidence of acting in bad faith. Simply being a bad business person who commingled funds doesn't mean they are abusing the system. But bad faith shows up as the intent to defraud or hide activities. 

Consider the injured tenant. They may demonstrate that the landlord moved debt between their properties or paid their home mortgage with business funds. In this case, they are treating all these businesses as alter egos of themself. You may then be able to go after the other assets. 

Where Can You Start?

In general, courts respect the separation of corporations from their owners. In order to pierce that protection, you must give the court good reason. Contact a personal injury lawyer to learn more.