How Does a Delaware Corporation or LLC Limit My Liability?
Generally, the stockholders of a Delaware Corporation and the owners of units in a Delaware LLC are not personally liable to the creditors of a Delaware Corporation or LLC provided they do not personally guarantee the obligations in writing. Many people form Delaware businesses specifically to have this protection, which is the strongest available.
This protection is referred to as the “corporate veil,” which guards the assets of individuals from claims against their company. “Piercing the corporate veil,” means breaking through this protection by having a court disregard this shield. While this judicial remedy is common in many states with their domestic companies, it is nearly impossible to do in Delaware.
It is particularly hard to hold a Delaware owner personally liable:
- In the absence in fraud,
- When the owner is not personally providing services,
- When the owner is following basic corporate formalities,
- When the owner is not comingling funds corporate assets with personal assets, and
- When the owner does not sign contracts that provide for personal liability, such as personal guarantee.
Delaware’s corporate veil is the thickest corporate veil of the 50 states, which makes it like a thicker “bulletproof jacket” to give you comfort while the corporation or LLC assumes business risks.