Arthur R. Lehman, L.L.C.

Lessons from Hobby Lobby in re: the corporate veil

When the United States Supreme Court handed down a decision in last year’s Hobby Lobby case, the media generally focused its analysis of the decision on potential implications for other business-related cases involving birth control, the Affordable Care Act or both of these issues. However, it is important for business owners of all kinds to understand that there may be a larger consequence of the Hobby Lobby decision that could affect numerous forms of business and commercial litigation filed in regards to a host of issues.

Specifically, the Hobby Lobby case may serve as the first snag in the fabric that ultimately tears a hole in the concept of the corporate veil. Businesses use the legal protections of the corporate veil in order to compartmentalize liabilities in certain ways. Most often, this legal tool helps to protect shareholder and business owner assets from being collected by a corporation’s creditors in liability, bankruptcy and other debt-related actions.

Shielding personal assets from corporate creditors is a vitally important protection that helps to ensure the stability of the American business community and helps to encourage investment in business ventures. If the Hobby Lobby decision ultimately imperils the solidly opaque nature of the corporate veil, the consequences could be staggering.

Business and corporate law is constantly evolving. As a result, it is important for businesses to consult experienced attorneys who remain fluent in the evolution of the law as it progresses. As the nature of the corporate veil is tested in the wake of the Hobby Lobby decision, it is arguably more important than ever that businesses retain solid counsel when litigating all kinds of business-related matters.

Source: NPR.com, "Hobby Lobby Ruling May Have Poked A Hole in The 'Corporate Veil'," Wade Goodwyn, August 05, 2014

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