What is meant by the corporate veil?
The corporate veil is a legal term used to refer to the concept of limited liability. This means that the owners of a corporation are generally protected from the legal and financial obligations of the corporation. This protection is provided because a corporation is a separate legal entity from the owners. The corporate veil serves as a barrier that shields corporate owners from personal liability. In the District of Columbia, the corporate veil is established through the formation of a corporation. This is done by filing Articles of Incorporation with the DC Department of Consumer and Regulatory Affairs. The Articles of Incorporation act as a legal contract between the corporation and the state, setting forth the rules for the formation and operations of the corporation. The corporation is then deemed to be a separate legal entity from the owners. The corporate veil is also strengthened by corporate formalities such as holding shareholder and board meetings, issuing stock, and keeping proper books and records. These formalities further demonstrate to the court system that the corporation is a separate legal entity. If these formalities are not followed, the corporate veil can be pierced, meaning that the owners can be held personally liable for the liabilities of the corporation. In summary, the corporate veil is an important legal concept that provides limited liability protection to owners of a corporation in the District of Columbia. It is established through the formation of a corporation, as well as through the adherence to corporate formalities. Failure to follow these formalities could potentially lead to the piercing of the corporate veil and the exposure of corporate owners to personal liability.
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