Also known as: alter-ego · alter egos
Written by attorneys · grounded in primary & secondary sources — see below
A corporation used by an individual to conduct personal business. A court may disregard the corporate form and impose liability on the individual when unity of interest and ownership shows that separate personalities no longer exist and adherence to the fiction of separate existence would sanction fraud or promote injustice.
Adam Anderson formed Atlas Ventures to operate a software startup. He deposited all client payments into his personal checking account and paid personal rent and groceries from the company account without records. Atlas Ventures held only $5,000 in capital and maintained no separate ledgers. When a client obtained a judgment against Atlas Ventures that the entity could not pay, the court allowed the client to reach Adam Anderson's personal assets.
Adrian Aguilar created Alliance Holdings as a shell to hold real estate investments. He contributed minimal capital, never held meetings, and transferred all rental income to his personal accounts. When a tenant won a judgment for property damage, Alliance Holdings had no assets. The court permitted the tenant to collect from Adrian Aguilar personally.
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Alice Atkins incorporated each of her ten taxis as a separate corporation with only $1,000 in capital per entity. She moved all fares to a central account she controlled. After one taxi injured a pedestrian, the injured party obtained a judgment against that corporation alone. The court refused to hold Alice Atkins personally liable because no fraud or alter ego operation was shown beyond undercapitalization.
Aaron Adams incorporated each retail store separately under minimal capitalization and routed all revenues to his central management company. One store's electrical fire injured a customer. After judgment against the store proved uncollectible, the court refused to allow the customer to reach Aaron Adams's personal assets because undercapitalization alone did not establish alter ego or fraud.
Anika Anand served as president of Apex Dynamics. She personally directed shipment of mislabeled products. When regulators sought penalties, the court treated Apex Dynamics as Anika Anand's alter ego and held her individually accountable for the violations.
Amber Alonzo served as the President's chief of staff. She performed core executive functions that the President would otherwise have performed. The court treated Amber Alonzo as the President's alter ego for purposes of extending immunity protections to her conduct.
No. Undercapitalization alone is insufficient absent a showing that the corporation was used to defraud creditors or operated as the shareholder's alter ego for personal benefit.
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Courts examine commingling of funds, failure to maintain corporate formalities, undercapitalization, and treatment of corporate assets as the owner's own.
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The second prong is met when an undercapitalized shell corporation is used merely to avoid personal liability, leaving creditors without recourse after the entity is stripped of assets.
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No. Modern statutes provide that failure to observe formalities relating to management is not a ground for imposing liability on a member.
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…Circuit to impute MBUSA’s California contacts to Daimler on an agency theory, at no point have they maintained that MBUSA is an alter ego of Daimler. Daimler, on the other hand, failed to object below to plaintiffs’ assertion that the California courts could exercise all-purpose jurisdiction over MBUSA.[^maj-12] But see…