XVII. Piercing the Veil

• Library: South Carolina Limited Liability Companies (SCBar) (2020 Ed.)

XVII. Piercing the Veil

Despite statutory protection, the formation of an LLC does not guarantee limited liability. Using the corporate concept of piercing the veil,⁶⁹ creditors and plaintiffs will undoubtedly attempt to impose personal liability on LLC members. Under corporate veil piercing, shareholders are vulnerable if they fail to observe corporate formalities, retain a minimum amount of assets in the corporation while extracting assets for their personal use, and use the corporation merely as an alter ego for their personal affairs. There are numerous reported cases in which South Carolina courts have dealt with the issue of piercing the corporate veil.⁷⁰ Although there is a growing body of case law applying this theory against LLCs,⁷¹ several issues still suffer from a lack of clear guidance, such as whether South Carolina law absolves an LLC member of personal liability for negligence committed while acting in furtherance of company business.

Several states specifically refer to methods for piercing the veil in their LLC statutes. Taking veil piercing even further, on May 28, 2009, the...