Alter ego liability is the doctrine that lets a Florida court disregard your LLC and hold you, or another company you control, answerable for that entity’s debts. It is neither automatic nor routine, but it is real, and owners usually confront alter ego liability at the worst possible moment: after a judgment has already been entered against the company and the creditor starts looking for someone else to collect from.
What Is Alter Ego Liability Under Florida Law?
Alter ego liability is a court’s decision to treat a business entity and the person or company behind it as one and the same for purposes of a particular debt. Florida courts describe this as piercing the corporate veil, and the analysis applies to LLCs and corporations alike.
No Florida statute sets out the elements of veil piercing, so the doctrine is judge-made and turns on the facts of your operation rather than the label on your formation documents. Neither a checklist violation nor a well-drafted operating agreement decides it.
What Must A Creditor Prove To Pierce An LLC?
A creditor must prove three separate things, and failing any one defeats the claim. Florida’s Third DCA states the test as requiring that:
- The owner “dominated and controlled the corporation to such an extent that the corporation’s independent existence, was in fact non-existent,” making the owner the entity’s alter ego;
- “[T]he corporate form must have been used fraudulently or for an improper purpose”; and
- “The fraudulent or improper use of the corporate form caused injury to the claimant.”
See Gasparini v. Pordomingo, 972 So. 2d 1053, 1055 (Fla. 3d DCA 2008) (quoting Seminole Boatyard, Inc. v. Christoph, 715 So. 2d 987, 990 (Fla. 4th DCA 1998)).
A creditor who proves domination and stops there loses, because control of a company is not misuse of a company. As that court put it, being a stockholder and officer does not, without more, create personal liability.
Does Florida Protect Your LLC If You Skip Formalities?
Yes, and it is a provision many Florida LLC owners have never read. Section 605.0304(1) makes an LLC’s debts “solely the debt, obligation, or other liability of the company.” Subsection (2) goes further:
“The failure of a limited liability company to observe formalities relating to the exercise of its powers or management of its activities and affairs is not a ground for imposing liability on a member or manager of the company for a debt, obligation, or other liability of the company.”
Florida’s Business Corporation Act contains no counterpart to that safe harbor, so shareholders of a corporation depend on case law for the same protection LLC members get from the statute itself.
Do not lean on it too hard. The habits behind thin records, such as paying household bills from the operating account, are what a creditor recasts as improper use. See how neglecting corporate formalities puts business owners at risk.
What Actually Breaks An LLC’s Liability Shield?
Improper conduct breaks it. Nothing else, standing alone, does. The Florida Supreme Court has held that “the corporate veil may not be pierced absent a showing of improper conduct,” and it reaffirmed the long-standing rule that concentrated ownership is not itself suspicious: “The mere fact that one or two individuals own and control the stock structure of a corporation does not lead inevitably to the conclusion that the corporate entity is a fraud.” See Dania Jai-Alai Palace, Inc. v. Sykes, 450 So. 2d 1114 (Fla. 1984) (quoting Advertects, Inc. v. Sawyer Industries, Inc., 84 So. 2d 21 (Fla. 1955)).
In practice, creditors build element two from conduct like this:
- Moving cash or equipment to insiders once a claim is threatened, which also invites a fraudulent transfer claim
- Running the operating account as a personal account, with no line between draws and company spending
- Stripping a company of assets and dissolving it, which can create individual liability for principals on its own footing
- Running several companies as one undifferentiated business, then calling them separate when the bill comes due
Can A Creditor Reach Your Other Company Instead Of You?
Yes. Florida veil piercing runs to affiliated entities, not just to individuals, and that is an exposure most owners never consider. In one Third DCA case, a creditor holding a judgment against a subsidiary reached the parent corporation for it.
The court applied a parallel two-part requirement: “it must be shown not only that the wholly-owned subsidiary is a mere instrumentality of the parent corporation but also that the subsidiary was organized or used by the parent to mislead creditors or to perpetrate a fraud upon them.” On the undisputed facts, the appellate court held the trial court erred by refusing to pierce, and reversed. See Ocala Breeders’ Sales Co. v. Hialeah, Inc., 735 So. 2d 542 (Fla. 3d DCA 1999) (quoting USP Real Estate Investment Trust v. Discount Auto Parts, Inc., 570 So. 2d 386, 390 (Fla. 1st DCA 1990)).
If you run a management company, a real estate holding company, and one or more operating entities, a judgment against any one of them is a potential claim against the group. That structure is common in professional service firms. Shared payroll, one set of books, and no intercompany agreements are the facts a creditor needs, which is why owners pursue corporate reorganization and weigh entity choice up front.
How Does An Alter Ego Claim Reach You After Judgment?
Through proceedings supplementary, Florida’s post-judgment collection procedure. The Ocala Breeders’ creditor filed no new lawsuit; it used the statute to pull the parent into the existing case.
The creditor files a motion and affidavit describing property of the debtor “in the hands of any person,” and the court issues a Notice to Appear. The recipient gets at least seven business days to file an affidavit explaining why that property should not be applied to the judgment, with discovery available and a statutory right to a jury trial. The court may then enter a money judgment against that person if it has personal jurisdiction. The statute also flips the burden onto the debtor in one situation: where, within one year before service of process, the debtor held title to or paid for personal property now claimed by a spouse, a relative, or a person on confidential terms, the debtor must prove the transfer was not made “to delay, hinder, or defraud creditors.” See Fla. Stat. § 56.29.
The practical consequence is speed: you can be pulled into an aggressive collection effort on a compressed schedule, in a case you were never a party to, on a judgment you never litigated. Where the debtor is itself a member of another LLC, Florida law makes a charging order the exclusive route to that interest, which is part of why creditors reach for alter ego instead.
How Do You Defend An Alter Ego Claim?
Start with the elements, because Florida makes the creditor carry all three.
- Attack causation. Element three requires that the improper use caused the claimant’s injury. A creditor who was fully informed, or who lost money for unrelated reasons, has a causation problem.
- Attack improper conduct. Domination is often conceded in a closely held company and is not worth fighting. Element two is where a weak claim is most vulnerable, because a company’s inability to pay a judgment is not by itself the improper conduct the element requires.
- Invoke the statute. If the theory rests on missed meetings or thin minute books, § 605.0304(2) says that failure “is not a ground for imposing liability.” No Florida appellate court has construed it yet, and it likely does not stop a creditor from using the same facts as evidence of domination, so treat it as a limit on the theory rather than a complete answer.
- Make them prove it. Alter ego must be asserted and adjudicated, with notice and a chance to defend, whether in the original case or in proceedings supplementary. The collection posture does not lower the creditor’s burden on any element.
- Separate the theories. Liability on a personal guaranty, for a breach of fiduciary duty, or for a tort you personally committed is not veil piercing and needs no such proof. Owners named individually should pin down which theory is being asserted.
Practical Steps That Preserve The Shield
- Keep one bank account per entity, never pay personal expenses from it, and put intercompany leases, management agreements, and loans in writing.
- Sign contracts in your representative capacity, and match your conduct to your governing documents, whether the company is manager-managed or member-managed.
- Revisit the key considerations in your operating agreement as ownership changes, and resolve owner and member disputes early.
Jimerson Birr represents Florida business owners in business litigation matters, including alter ego and veil piercing claims brought by creditors against owners and affiliated companies. If a creditor is trying to look past your entity, we can help you evaluate where the exposure sits.
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