Protecting Yourself as a Shareholder or Member

We often set up Corporations (owners are shareholders) and Companies (owners are members) because people are concerned about protecting their individual assets and possession from Corporate liabilities.

The Michigan Court of Appeals recently ruled in Gallagher v Persha (Crt. App. No. 325471) that Creditors may now file a separate action against a shareholder or member for a corporate debt and “pierce the corporate veil.”

In a case of first impression, the Michigan Court of Appeals concluded that: “when a judgment already exists against a corporate entity, an additional cause of action is not needed to impose liability against a shareholder or officer if a court finds the necessary facts to pierce the corporate veil.”  Thus, once a judgment against a Michigan corporate entity exists, be it a corporation or on LLC, and facts allowing the veil to be pierced exist, a judgment creditor can pursue claims against the individuals whether they are shareholders of a corporation or members of a limited liability company.

Simply put—one must maintain a distinct and separate corporate identity, file the timely and appropriate paperwork, and be prepared to establish the legal differences between their company and themselves. It is now much easier to sue individual owners.

Contact us for a review of your business to confirm your individual assets are protected, and you and safe from future litigation.