This follows-up my May 15, 2007 and May 23, 2007 articles about Indiana law applicable to creditors that want to pierce the corporate veil and that wish to recover under Indiana’s Uniform Fraudulent Transfer Act. On July 20, 2007, the Indiana Court of Appeals issued an opinion upholding the trial court’s piercing of the corporate veil, normally a difficult thing to do, as well as affirming liability based on the UFTA. See, Four Seasons Manufacturing, Inc. v. 1001 Coliseum, LLC, 2007 Ind. App. LEXIS 1589 (Ind. Ct. App. 2007).

Indiana’s general principles on “piercing”. Four Seasons, on page 12, sets out these guidelines:

Most shareholders believe a corporation protects them from personal liability. This is generally true unless alter ego is successfully asserted.

Alter ego is an equitable claim that a corporation should be set aside in a lawsuit and the shareholders held personally liable for a debt. The theory was antiquated and rarely used. In recent years, it has seen a rebirth as many small business corporations are formed using cheap online services. While these services file the entity with the state, there is no real follow up or guidance in regard to how the entity is actually supposed to function. This, of course, leads to alter ego claims and disaster for the shareholders.