Piercing the Corporate Veil in Georgia: How Owners Lose LLC Protection

The starting point: owners aren't liable for company debts

Under O.C.G.A. § 14-11-303, a member, manager, agent, or employee of a Georgia LLC isn't liable for the company's debts "solely by reason of being a member, manager, agent, or employee." Corporations have a similar rule. The main exceptions are obligations you take on yourself, like a personal guaranty, certain tax liabilities, and your own wrongful acts.

When Georgia courts pierce the veil

Georgia courts apply the doctrine "to remedy injustices" when owners have disregarded the company's separate existence (Baillie Lumber Co. v. Thompson, 2005, as quoted in later cases). The plaintiff "must show that the defendant disregarded the separateness of legal entities by commingling on an interchangeable or joint basis or confusing the otherwise separate properties, records or control" (Christopher v. Sinyard, 2012). "There must be evidence of abuse of the corporate form." Being the sole owner, by itself, isn't enough.

The same test applies to LLCs. In Bonner v. Brunson (2003), the Court of Appeals said a court may disregard an LLC when a member, "in order to defeat justice or perpetrate fraud, conducts his personal and LLC business as if they were one." The LLC Act says it "does not alter any law with respect to disregarding legal entities" (§ 14-11-314).

Warning signs courts look at

• Paying personal bills from the company account, or company bills from a personal account.
• No separate bank account, or one account shared by several businesses.
• Moving money out of the company to the owner when it can't pay its debts.
• Contracts, invoices, and checks in the owner's name instead of the company's.
• Starting or running the company with almost no money to cover foreseeable obligations. Undercapitalization matters most when there's evidence it was done to avoid future debts (Milk v. Total Pay & HR Solutions, 2006).
• Multiple related companies with shared employees, equipment, and money and no records of who owes what.

Formalities: less important for LLCs, still a factor for corporations

For LLCs, Georgia law is explicit: "The failure of a limited liability company to observe formalities relating to the exercise of its powers or the management of its business and affairs is not a ground for imposing personal liability" (§ 14-11-314). You don't lose protection just because you skipped an annual meeting.

Corporations don't have that statute. Missing board meetings and minutes won't pierce the veil alone, but courts weigh it alongside commingling and undercapitalization. In Christopher v. Sinyard, piercing was upheld on that combination.

Everyday habits that protect you

• Keep a separate business bank account and card, and run every company dollar through them.
• Pay yourself through documented salary, draws, or distributions, not by paying personal bills from the company.
• Sign everything in the company's name with your title, such as "ABC Roofing, LLC, by Jane Smith, Member."
• Fund the company enough to cover its foreseeable obligations, and carry appropriate insurance.
• Keep a written operating agreement or bylaws, and document major decisions. See your LLC operating agreement.
• Document loans between you and the company, and between related companies.
• Keep the company in good standing with the Secretary of State. See BOI reporting and state filings.

Frequently Asked Questions