Piercing the Corporate Veil in Florida: When Your LLC Won’t Protect You
The whole point of forming an LLC is liability protection. But Florida courts regularly set that protection aside — a doctrine known as “piercing the corporate veil” — when business owners treat the LLC as an extension of their personal finances rather than a separate legal entity.
If you’re running a Florida business, understanding when this happens (and how to prevent it) is essential.
The Two-Part Test Florida Courts Apply
To pierce the corporate veil under Florida law, a plaintiff must typically show:
- The LLC was an alter ego — meaning the owner failed to respect the entity as separate from themselves
- Allowing the protection would sanction fraud or injustice — there must be some inequitable result if the shield holds
Both elements are required. Simply proving sloppy record-keeping isn’t enough — there must be a connection between the disregard of the corporate form and the harm suffered.
Eight Factors Courts Look At
When evaluating alter ego claims, Florida courts consider:
- Commingling of personal and business funds
- Failure to maintain separate books and records
- Using the LLC to pay personal expenses
- Failure to hold required meetings or keep minutes
- Undercapitalization — starting the business without adequate funding
- One person controlling all decisions without independent oversight
- Fraudulent transfers of assets out of the LLC before a lawsuit
- Guaranteeing LLC debts personally (which courts see as evidence of blurred lines)
Three Scenarios Where This Goes Wrong
The mixed bank account. An owner runs all personal and business transactions through a single checking account. When a vendor sues the LLC for non-payment, the court finds the LLC is an alter ego and holds the owner personally liable.
Pre-lawsuit asset transfers. A business owner, anticipating a contract dispute, transfers the LLC’s main asset (equipment worth $200K) to a family member. Florida’s Uniform Fraudulent Transfer Act (FUFTA) allows the creditor to unwind the transfer and reach those assets.
Undercapitalization. A construction LLC is formed with $500 in the bank and immediately takes on a $2M project. When it defaults, the court finds the entity was never a real business — just a shell to insulate the owner from obvious risk.
Six Ways to Keep the Shield Intact
- Maintain a dedicated business bank account — never mix personal and business money
- Document major decisions — even in a single-member LLC, keep written records of significant business decisions
- Capitalize adequately — fund the LLC with enough to actually operate the business
- Pay yourself a proper salary — don’t just drain the account; run distributions through proper channels
- Sign contracts as the LLC — always sign “John Smith, Manager, XYZ LLC” not just “John Smith”
- Consult before transferring assets — any significant asset movement should involve a lawyer, especially during disputes
Single-Member LLCs: Extra Caution Required
Florida courts apply somewhat stricter scrutiny to single-member LLCs, since there’s no natural check on the owner’s conduct. If you’re the sole owner, your record-keeping and separation practices need to be especially clean.
Finberg Firm PLLC handles business litigation and corporate disputes across Florida. If you’re concerned about personal liability exposure, or facing a creditor who’s threatening to pursue you personally, schedule a consultation.
Contact us: https://finbergfirm.com/contact/
This article is for general informational purposes only and does not constitute legal advice.
— Hao Li, Esq., CFA, CAIA, CGMA, EA | Finberg Firm PLLC