alter ego


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Alter Ego

A doctrine used by the courts to ignore the corporate status of a group of stockholders, officers, and directors of a corporation in reference to their limited liability so that they may be held personally liable for their actions when they have acted fraudulently or unjustly or when to refuse to do so would deprive an innocent victim of redress for an injury caused by them.

A corporation is considered the alter ego of its stockholders, directors, or officers when it is used merely for the transaction of their personal business for which they want Immunity from individual liability. A parent corporation is the alter ego of a subsidiary corporation if it controls and directs its activities so that it will have limited liability for its wrongful acts.

The alter ego doctrine is also known as the instrumentality rule because the corporation becomes an instrument for the personal advantage of its parent corporation, stockholders, directors, or officers. When a court applies it, the court is said to pierce the corporate veil.

Courts have not traditionally applied the alter ego doctrine to other business forms, such as partnerships and limited partnerships, because partners generally do not enjoy the same form of limited liability as corporate stockholders, officers, and directors. By comparison, however, owners of limited liability companies may structure their business in a manner similar to a corporation so that members and managers are shielded from personal liability for the debts of the Limited Liability Company (LLC). Several courts have determined that the alter ego doctrine may also apply to LLCs. For instance, in Kaycee Land & Livestock v. Flahive, 46 P.3d 323 (Wyo. 2002), the Wyoming Supreme Court held that the equitable doctrine of piercing the veil was an available remedy under the Wyoming Limited Liability Company Act.

Cross-references

Corporations; Immunity; Liability.

alter ego

n. a corporation, organization or other entity set up to provide a legal shield for the person actually controlling the operation. Proving that such an organization is a cover or alter ego for the real defendant breaks down that protection, but it can be difficult to prove complete control by an individual. In the case of corporations, proving one is an alter ego is one way of "piercing the corporate veil." In a lawsuit complaint, it might be stated (pleaded) that "the Hotshot Corporation was the alter ego of Joseph Snakeoil."

alter ego

noun alternate, counterpart, double, living image, match, other, other half, other person, other self, perfect substitute, second self, shadow, stand-in, twin
Associated concepts: agent, alter ego doctrine, corporate alter ego, piercing the corporate veil, separate corporate entity
See also: complement, counterpart
References in periodicals archive ?
The court noted that "undercapitalization is often critical in alter ego analysis the fact that a subsidiary maintains what amounts to a 'zero balance,' and relies exclusively upon another entity to service its debts, is strong evidence that the subsidiary lacks an independent identity.
Alter ego means other self--where one person or entity acts like, or for, another to the extent that they may be considered identical.
In the world of sport, the company is extolled for its strength and performance and Alter Ego maintains this philosophy while combining an altogether sleeker persona.
To provide corporations with guidance relating to insulating themselves from, or planning for, state tax liability, this article will review four areas: the nature and history of the nexus requirement, the status of the agency approach, the status of the alter ego approach, and the status of the unitary approach.
Cohen's previous alter egos include Ali G and Borat.
I said to the guys, 'Hey, how about disguising ourselves and getting an alter ego, because we're The Beatles and we're fed up'," the Daily Express quoted Macca, as saying.
The latter will be his alter ego, living a separate life and doing all the dirty work, allowing the gentlemanly Montmorency to live the good life in a fashionable hotel.
For anyone who stares in this mirror, Aunt Pittypat becomes a ghastly alter ego, our very own portrait a la Dorian Gray.
As if to prove the point, one of Coventry's hardest-working bands, Alter Ego, play at the venue on Sunday.
Davyon further claimed that EDEA is a corporation which is owned and controlled by Greenberg and is an alter ego of Greenberg; and that Davyon continually occupied the property since long before the foreclosure action pursuant to a valid lease, with the full knowledge of EDEA's principals, Mr.
At other times Durkee dropped her sullen affect and emerged as a burning, Egon Schiele--like alter ego to Birdsall's serene, ruby-lipped Madonna.
12) According to the Tax Court, "corporate fraud exists if either: (1) the corporate agent so controls the corporation that the corporation becomes the agent's alter ego, or (2)the agent is acting in behalf of the corporation with the result that the corporation actually benefits from the agent's fraudulent acts.