LLC Operating Agreement — piercing the corporate veil concern

Looking for advice on a legal issue. Here's what happened.

piercing the corporate veil concern. I've been dealing with this for about 7 weeks now and the situation isn't improving.

I have already tried to resolve this directly but the other party is not cooperating.

Do I have a strong case? What should my next steps be?

Business attorney here -- veil piercing is one of the most misunderstood concepts in LLC law, so let me break down what actually matters in Florida.

Under Florida law (primarily developed through case law since the LLC Act does not have a specific veil-piercing statute), courts apply a multi-factor test similar to the corporate alter ego doctrine. The key factors that courts look at are:

1. Commingling of funds: This is the number one factor. If you are using your LLC bank account to pay personal expenses, or depositing business revenue into a personal account, you are creating a strong argument that the LLC is just your alter ego. Get a separate business bank account and use it exclusively for business transactions.
2. Failure to observe formalities: Even though Florida LLCs have fewer formal requirements than corporations, you still need an operating agreement, you should document major decisions in writing, and you should hold yourself out as the LLC (not personally) in all business dealings.
3. Undercapitalization: If your LLC has no assets, no insurance, and no realistic ability to meet its obligations, courts may find it was set up solely to shield you from liability. Make sure your LLC is adequately capitalized for the type of business you run, and carry appropriate insurance.
4. Using the LLC as a mere instrumentality: This means the LLC has no independent purpose or existence separate from you personally.

Your operating agreement is actually your strongest defense against veil piercing. A well-drafted operating agreement should include: capital contribution provisions, profit and loss allocation, management structure, restrictions on member authority, and dissolution procedures. Even for a single-member LLC, having a comprehensive operating agreement demonstrates that you treat the entity as a legitimate separate business.

Practical steps to protect yourself right now: (1) make sure you have a written operating agreement, (2) open a dedicated business bank account if you have not already, (3) sign all contracts in your capacity as a member or manager of the LLC rather than personally, and (4) get appropriate business insurance. These steps cost very little but provide significant protection.