Piercing the Corporate Veil Against Amazon Aggregators featured image

Piercing the Corporate Veil Against Amazon Aggregators

by John DiGiacomo

Partner

Corporate

“Piercing the corporate veil” is a legal doctrine that, in some cases, allows the individual owners of a corporate entity to be held personally liable for corporate debts. Generally, the corporate structure prevents creditors of the corporation from holding the owners legally liable. For example, if a company buys inventory on credit but ultimately defaults on paying for the inventory, the owners cannot be sued by the supplier. However, as noted, in some cases, the “corporate veil” can be “pierced,” allowing the supplier to “reach” the assets of the individual owners of the company. These same general legal principles apply to Amazon aggregator companies.

Amazon aggregators are businesses that buy Amazon sellers and their accounts. The general idea is to consolidate those seller accounts and use efficiency of scale to increase market share and profitability. However, Amazon aggregators tend to be small, closely-held companies that may “play fast and loose” with the corporate rules. If that happens, the individual owners of an Amazon aggregator company may end up being legally liable for debts and obligations of the company.

Piercing the corporate veil is a mostly judge-made set of rules, and the general idea is preventing fraud and misuse of the corporate forms. Corporations and other corporate entities are separate legal entities. As such, various and numerous legal requirements must be met for a corporation to maintain its separate legal status. For example, a corporation must have a board of directors that actually meets to decide what the company should do. This is an example of a “corporate formality” that must be honored for a court to deem the corporation a separate legal entity. Thus, one way that a court will pierce the corporate veil is if the owner (or owners) fails to comply with the corporate formalities. In that case, the court will say that there is a “unity of interest and ownership” between the individual owners and the corporate entity so that they are not really separate. This is often phrased as whether the corporate entity is a “mere facade” for the individuals. When that happens, then the court will pierce the corporate veil.

Another justification for piercing the corporate veil is to prevent fraud. Even when the corporate formalities are met, some individuals may be able to use the corporate structure to commit fraud. Courts will evaluate this possibility.

With these legal principles in mind, courts will consider a large number of factors when asked to pierce the corporate veil. These include:

  • Whether the company had adequate capitalization
  • Did the company actually issue stock certificates or other ownership documents?
  • Failure to observe corporate formalities, including the holding of board meetings, keeping of board minutes, etc
  • Did the company pay dividends?
  • Did the company become insolvent or go bankrupt?
  • Were all the directors involved in running the company?
  • Commingling of funds — was there a separate corporate bank account?
  • Diversion of assets from the corporation to the owners
  • Failure to maintain arm’s length relationships among related entities

Contact the Business Litigation Attorneys at Revision Legal

For more information, contact the experienced Business Lawyers at Revision Legal. You can contact us through the form on this page or call (855) 473-8474.

Extra, Extra!
Recent Posts

Worrying About SaaS Agreements and Cross-Border Data Transfers

Worrying About SaaS Agreements and Cross-Border Data Transfers

Internet Law

When your business is contemplating a software-as-a-service (“SaaS”) agreement, there are a large number of considerations. An SaaS agreement is, of course, a subscription service where a software package is centrally hosted and accessed by a SaaS company’s customers. Issues to be aware of include: As important as the foregoing issues are, one often overlooked […]

Read more about Worrying About SaaS Agreements and Cross-Border Data Transfers

FAQs About Legal Services for Social Media Influencers, Bloggers, and Online Content Creators

FAQs About Legal Services for Social Media Influencers, Bloggers, and Online Content Creators

Internet Law

If you are serious about your career as a social media influencer, blogger, and/or online content creator, you ARE going to need legal services at some point. Online creation is big business now, and big business means the need for legal services. The Internet and Social Media Attorneys at Revision Legal are here to help. […]

Read more about FAQs About Legal Services for Social Media Influencers, Bloggers, and Online Content Creators

Take it Down Act: Ban on “Revenge Porn” Goes National

Take it Down Act: Ban on “Revenge Porn” Goes National

Internet Law

Congress recently passed the Take It Down Act (“TIDA”), and the law was signed by the President in mid-May 2025. See AP media report here. Interestingly enough, “Take It Down” is an acronym for “Tools to Address Known Exploitation by Immobilizing Technological Deepfakes on Websites and Networks Act.” TIDA prohibits what is commonly called “revenge […]

Read more about Take it Down Act: Ban on “Revenge Porn” Goes National

Put Revision Legal on your side