| It's Extremely Difficult for Anyone to Pierce Your | | | | corporate fiction of a separate entity would, under the |
| Nevada State Corporate Veil | | | | circumstances, sanction fraud or promote injustice. |
| First, what exactly does "piercing the corporate veil" | | | | The burden of proof for all three "general |
| mean? When you form a corporation, whether it's in | | | | requirements" is on the plaintiff who is seeking to |
| Nevada, California, Texas or wherever, you must | | | | pierce the veil, and a failure to prove any of the three |
| follow certain corporate formalities. Remember, a | | | | will result in your veil not being pierced! Essentially, |
| nevada state corporation can do everything you can | | | | Nevada says that unless they can prove fraud, your |
| do except act or think, so it does those things through | | | | corporate veil will not be pierced. That is awesome |
| your board of directors, officers and shareholders. If | | | | protection. |
| your corporation does not keep accurate records of | | | | Nevada State Corporation - Case In Point |
| meetings by minutes, and if the corporation | | | | The landmark case that proves this point is the case |
| commingles funds, it makes it easier for someone to | | | | of Roland vs. Lepire (1983). We recommend that you |
| pierce your corporate veil if the corporation is involved | | | | keep accurate corporate records to protect your |
| in a lawsuit. | | | | corporate veil, and make sure you have adequate |
| Low capitalization is another reason why corporate | | | | capitalization as well. In Roland, the corporation had a |
| veils get pierced. In some states, like California, we | | | | negative net worth at the time of the trial so it was |
| recommend that you capitalize your corporation with | | | | clear it was inadequately capitalized. On top of that, |
| at least $1,000. If you don't, it's easier for someone to | | | | the corporation never held formal directors or |
| prove that you are simply the alter ego of the nevada | | | | shareholders meetings, never started or kept a |
| state corporation (one and the same as the | | | | corporate minute book, never paid dividends, and didn't |
| corporation), and then pierce your corporate veil! How | | | | pay salaries to the officers or directors. On the other |
| does Nevada feel about this? Nevada is called a "thin | | | | hand, the corporation managed to secure a corporate |
| capital state," meaning you can form a corporation in | | | | checking account, as well as a general contractor's |
| Nevada for as little as $100. Also, Nevada has a | | | | license and a framing contractor's license, "both in its |
| certain attitude about piercing the corporate veil, which | | | | name". |
| is why major corporations domicile in Nevada. Let's | | | | What happened? The court concluded that, "Although |
| explain. | | | | the evidence does show that the corporation was |
| The Nevada State Test - Trying to Pierce the | | | | undercapitalized and that there was little existence |
| Corporate Veil | | | | separate and apart from [the two key |
| First, in Nevada, anyone trying to sue you must pass a | | | | shareholders]evidence was insufficient to support a |
| three-prong test. They must prove all three parts to | | | | finding that appellants were the alter ego of the |
| pierce your corporate veil: | | | | corporation." The Nevada Supreme Court has made |
| The corporation must be influenced and governed by | | | | clear that unless the plaintiff acting against you is able |
| the person asserted to be the alter ego. | | | | to meet the burden of proving that "the financial setup |
| There must be such unity of interest and ownership | | | | of your corporation is only a sham and caused an |
| that one is inseparable from the other. | | | | injustice, " your veil is unlikely to be pierced. |
| The facts must be such that adherence to the | | | | |