Piercing the Corporate Veil

In Indiana, it is difficult to go after a business owner’s personal assets in a commercial setting, if

the business owner has a properly formed corporation or company and properly limited his or her liability; it is difficult, but not impossible.

A party seeking to pierce the corporate veil bears the burden of establishing that the corporation was so ignored, controlled or manipulated that it was merely the instrumentality of another, and that the misuse of the corporate form would constitute a fraud or promote injustice." Gurnik v. Lee, 587 N.E.2d 706, 710 (Ind.Ct.App.1992). Likewise, Indiana courts are reluctant to disregard a separate corporate entity. Winkler v. V.G. Reed & Sons, Inc., 638 N.E.2d. 1228, 1232 (Ind. 1994); Oliver v. Pinnacle Homes, Inc., 769 N.E.2d. 1188, 1191 (Ind.Ct.App. 2002). The courts will disregard a corporate entity only to prevent fraud or unfairness to third parties. Id. The legal fiction of a corporation may be disregarded where one corporation is so organized that it is a mere instrumentality or adjunct of another corporation. Id; Smith v. McLeod Distributing, Inc., 744 N.E.2d. 459, 462 (Ind.Ct.App. 2000). Indiana courts may refuse to recognize corporations as separate entities where the facts establish that several corporations are acting as the same entity. Id.

In deciding whether the party seeking to pierce the corporate veil has met its burden, Indiana courts consider whether the party has presented evidence showing:

1) undercapitalization;

2) absence of corporate records;

3) fraudulent representation by corporation shareholders or directors;

4) use of the corporation to promote fraud, injustice, or illegal activities;

5) payment by the corporation of individual obligations;

6) commingling of assets and affairs;

7) failure to observe required corporate formalities; or

8) other shareholder acts or conduct ignoring, controlling, or manipulating the corporate form.

Community Care Centers, Inc. v. Hamilton, 774 N.E.2d 559,560 (Ind.Ct.App. 2002) (internal citation omitted). Distinct corporations, even parent and subsidiary corporations, are presumed separate; to overcome this presumption, a plaintiff must show that one corporation dominated another to the extent that the subordinate was the mere instrumentality of the dominant corporation, that the dominant corporation employed the subordinate to perpetrate a fraud, or that the capital placed in the subordinate was illusory or trifling compared to the business to be done and the risks of loss, and also must demonstrate that the defalcation of the corporations, for example, fraud, was the proximate cause of the injury sustained. Smith v. McLeod Distributing, Inc., 744 N.E.2d 459,461 (Ind.Ct.App. 2000).

If you have been wronged by a home improvement or repair company give us a call. We have more experience than any other law firm in Northeast Indiana, with addressing the complicated statutes that govern home repairs and include every project undertaken at your home by a vendor which has a value of over $150.00. Give us a call today! At PODLASKI LLP “It’s not just business; it’s personal!” Our motto is our commitment to you: we analyze each of your legal issues and pledge our time, effort, and talent toward solving them as expeditiously as possible, while providing you with excellent, cost effective, and personal legal services.