Modern Counsel for Growing Companies
In plain English
A legal basis for disregarding an entity's liability boundary and holding an owner responsible for an obligation otherwise belonging to the entity. The requirements vary by jurisdiction and claim. Texas places significant statutory limits on contract-related veil piercing; poor records or ownership control alone do not automatically satisfy them.
Types and key distinctions
Alter Ego
A theory that an entity and the person controlling it have been operated without meaningful separation. It can arise in efforts to disregard an entity's separate existence, but it does not automatically establish owner liability. Texas imposes additional statutory limits, particularly for claims involving contractual obligations.
Actual Fraud
Fraud involving intentional deception, rather than liability inferred solely from a relationship or legal duty. The required proof depends on the claim. In Texas veil-piercing disputes over contractual obligations, actual fraud and direct personal benefit can be central statutory requirements; ordinary business failure alone does not establish them.