Also known as: alter-ego doctrine · alter ego doctrines · alter ego · corporate alter ego
Written by attorneys · grounded in primary & secondary sources — see below
A doctrine permitting a court to disregard a corporation's separate legal existence when its owners have so dominated and misused the entity that it functions as their alter ego and respecting separateness would sanction fraud or promote injustice.
Amber Alonzo formed Aether Technologies to operate a software service. She deposited client payments into her personal account, paid her mortgage from company revenues, and kept no minutes or stock records. After a client obtained a judgment, Amber transferred the remaining assets to a new LLC she controlled. The court disregarded the corporate form because the unity of interest was complete and the transfers frustrated collection.
Audrey Ashton created Avalon Pharmaceuticals with minimal capital and no separate accounts. She used the entity to market a product while routing all income to her consulting business. When a customer won a damages award, the corporation had no assets left. The court pierced the veil because the entity served only as an instrumentality to shield Ashton from personal responsibility.
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Arthur Abrams incorporated each of his cabs as a distinct entity with minimal assets and no insurance. A pedestrian injured by one cab sought to reach Abrams personally. Because the corporations maintained separate identities and no evidence showed they were used to perpetrate fraud, the court refused to pierce the veil.
Amelia Amari directed all decisions for Apex Dynamics through her personal office and treated its contracts as her own. When a supplier sued for breach, the court examined whether the subsidiary's separate personality had been extinguished by complete domination.
Ava Adebayo ran Alliance Holdings without any board oversight and signed all agreements in her individual capacity. An employee injured by company practices sought to impose liability directly on Adebayo by showing the entity was merely her instrument.
Alice Atkins incorporated each cab separately and siphoned all fares to her personal management company. After a passenger recovered a judgment against one corporation, the court considered whether the entities existed only to benefit Atkins rather than as genuine separate businesses.
No. Undercapitalization is relevant but insufficient without additional proof that the corporation was operated as an alter ego or used to perpetrate fraud or injustice.
Courts examine commingling of funds, failure to observe corporate formalities, absence of separate bank accounts or records, and treatment of corporate assets as personal property.
Yes. The second prong is satisfied when respecting the corporate form would promote injustice, such as when an owner strips assets to defeat a known creditor claim.
Yes. Courts apply the same two-prong analysis to LLCs when members commingle funds, ignore formalities, and use the entity to shield personal assets from creditors.
…Roger Traynor, speaking for the court, outlined the applicable law in this area. “The figurative terminology ‘alter ego’ and ‘disregard of the corporate entity’”, he wrote, “is generally used to refer to the various situations that are an abuse of the corporate privilege The equitable owners of a…