Also known as:two-part inquiry · two part test · two-part test · two-prong test · two-prong inquiry
Written by attorneys · grounded in primary & secondary sources — see below
2 senses
1
in corporate law
A two-prong test for deciding whether to pierce the corporate veil. The first prong examines whether the corporation was the alter ego or mere instrumentality of its shareholder so that a unity of interest exists. The second prong examines whether respecting the corporate form would sanction fraud or promote injustice.
2
Sense 1
1
in corporate law
A two-prong test for deciding whether to pierce the corporate veil. The first prong examines whether the corporation was the alter ego or mere instrumentality of its shareholder so that a unity of interest exists. The second prong examines whether respecting the corporate form would sanction fraud or promote injustice.
Sources & Authorities· 1 primary source
Select any source to read its text and confirm it supports the definition.
Cases
Sense 2
2
in constitutional criminal procedure
A two-part test for determining whether government conduct constitutes a search under the Fourth Amendment. The first part asks whether the individual exhibited an actual subjective expectation of privacy. The second part asks whether that expectation is one that society recognizes as reasonable.
Sources & Authorities· 1 primary source
Select any source to read its text and confirm it supports the definition.
Cases
Put it into practice
Test Yourself
10
Practice Questions5
in constitutional criminal procedure
A two-part test for determining whether government conduct constitutes a search under the Fourth Amendment. The first part asks whether the individual exhibited an actual subjective expectation of privacy. The second part asks whether that expectation is one that society recognizes as reasonable.
Each sense below has its own examples, sources, and questions.
Examples1
Undercapitalized Catering Shell
Talia Torres ran Ortiz Catering as a closely held corporation with no separate tax ID and no meaningful capital. She deposited all business receipts into her personal account and paid household bills from the same account while ignoring corporate formalities. When the company defaulted on trade credit extended by Harvest Foods, the court applied the two-part inquiry to determine whether the entity was Torres's alter ego and whether limited liability would produce injustice, ultimately holding Torres personally liable.
Frequently Asked2
What are the two prongs of the test for piercing the corporate veil?+
The first prong requires proof that the corporation was the shareholder's alter ego or mere instrumentality, shown by factors such as gross undercapitalization, commingling of funds, and failure to observe corporate formalities. The second prong requires proof that respecting the corporate form would sanction fraud or promote injustice to creditors.
Supporting sources
Does failure to observe corporate formalities alone justify piercing the veil under the two-part inquiry?+
No. The first prong looks at the totality of factors showing unity of interest, including undercapitalization and commingling, while the second prong separately requires a showing that limited liability would promote injustice. Formalities are relevant but not dispositive by themselves.
Supporting sources
Examples1
Expectation in Public Phone Booth
Theodore Tucker placed a call from a public telephone booth and closed the door behind him. Government agents attached a listening device to the outside of the booth without a warrant. The court applied the two-part inquiry to decide whether Tucker had exhibited a subjective expectation of privacy and whether society would regard that expectation as reasonable, concluding that the surveillance constituted a search protected by the Fourth Amendment.
Frequently Asked1
How does the two-part inquiry apply to Fourth Amendment searches?+
The inquiry first determines whether the person exhibited an actual subjective expectation of privacy in the place or item searched. It then determines whether that expectation is one society is prepared to recognize as reasonable, so that government intrusion violates the Fourth Amendment.
Supporting sources
Business Associations Corporations and LlcsPiercing the veil · Piercing the veilUBEIntermediate