Let’s just pretend we’re perfect and you and I have the same old doughnut shop I keep using. I’m the cook and you’re the investor and we’re splitting at 50-50 and it’s a corporation, so we each own 100 shares exactly 50-50. Let’s just assume I’m frying some doughnuts up some morning at 4:00 o’clock and my grease gets on fire and it explodes and it badly disfigures three local cheerleaders from a high school who were buying their doughnuts for their, you know, for their cheerleading society.

Well, believe me, these badly injured girls are all going to have great hungry contingent fee litigators jumping at the chance to tear us apart. They’re certainly going to sue the corporation, no doubt. Well, who else are they going to sue?

Well, let me tell you. They’re going to sue me and they’re going to sue you; and if you’re married, they’re going to sue your spouse. So, that’s just the way it always works. This corporate veil is an illusion with most small companies.

Yes with IBM. If I’m an IBM shareholder and IBM gets sued for some anti-trust violation or gets sued because they made a product that was defective or injured somebody, believe me, that’s not going to stop at the corporate level.

They might go to the individual who ran the program- that caused the problem. They might even sue some members of the board or the president, alleging that he or she knew or should have known- but that’s really tough and it isn’t going to get to the shareholders.

But listen, with our little doughnut shop, our local car dealership, and our local hardware store; they’re going to get right to the people who manage and the people who own the company. They’re going to allege that we either had the power and we should have known that we did have the power, and we should have known about the dangerous nature of our fried machine that’s just the bottom line.

They’re going to nail our spouses that will ruin our sex lives, they’ll make it so there’s a lot of strain in the marriage. They will do everything to encourage settlement.

So, how strong is a corporate veil?

The answer is, it’s not strong at all. You should never depend upon it to give you any meaningful protection in a small company.

That’s the bottom line truth and with that said, I love corporations.
Asset protection corporation is a corporation. It’s a sub S corporation which is the worst type of corporation you have if you care about asset protection because it cannot be owned by a foreign trust.