Piercing the Corporate Veil

Definition

When courts hold shareholders personally liable for corporate debts by ignoring the legal separation between company and owners. It's what happens when you treat your LLC like a personal piggy bank.

Example Usage

The judge pierced the corporate veil after discovering the owner had commingled personal and business funds in flagrant disregard of corporate formalities.

Origin

Legal doctrine developed in Anglo-American corporate law in the 19th and 20th centuries

Fun Fact

Simply undercapitalizing a business or paying yourself unreasonable salaries can be grounds for piercing the veil—your liability shield has terms and conditions.

Source: Corporate law and business entity regulations

Related Terms

Intermediate

clawback

A provision requiring executives to return compensation if certain conditions aren't met or if it was based on fraudulent numbers. It's the corporate version of 'give that back right now.'

💰 Finance / Accounting

Advanced

covenant lite

Loans with few or no maintenance covenants that would normally protect lenders, essentially trusting borrowers to be responsible without supervision. It's the financial equivalent of lending your car to a teenager with no curfew.

💰 Finance / Accounting

Intermediate

tangible book value

A company's book value after stripping out intangible assets like goodwill and patents—basically what's left if you only count things you can drop on your foot. It's the pessimist's version of book value that assumes intangibles are worthless.

💰 Finance / Accounting

Intermediate

net present value

The difference between the present value of cash inflows and outflows over time, discounted because a dollar today is worth more than a dollar tomorrow—thank you, inflation and opportunity cost. If it's positive, invest; if negative, run away.

💰 Finance / Accounting

Advanced

Arbitrage

Buying something cheap in one place and selling it for more in another, which sounds like a genius strategy until you realize it's basically what your cousin does with concert tickets. Wall Street just gave it a fancier name and added decimal points.

💰 Finance / Accounting

Beginner

budgetary

The polite adjective for anything related to money arguments in government or business, where "budgetary concerns" means "we don't want to pay for that." It's the formal way of discussing fiscal matters while avoiding words like "broke," "wasteful," or "embezzled." When someone mentions budgetary constraints, they're either actually out of money or just don't want to fund your brilliant idea.

💰 Finance / Accounting

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