KEN KIRSCHENBAUM, ESQ ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE You can read all of our articles on our website. Having trouble getting our emails? Change your spam controls and whitelist ken@kirschenbaumesq.com ****************************** Do you need separate entity or dba January 11, 2025 *************************** Do you need separate entity or dba **************************** Ken: When an alarm company purchases another company but wants to continue to operate it under its original name is it sufficient to use a DBA? Would a second corporation offer better protection? Mark S. Fischer Systems Support Specialists mfischer@systemssupportspecialists.com 516-384-6064 ***************************** Response ***************************** Separate entities will insulate liability from one entity to another, technically. The problem is the legal precept of Piercing the Corporate Veil. Piercing the corporate veil is a legal doctrine that allows courts to hold another entity or corporation's shareholders or directors personally liable for the corporation's debts or actions. This is a powerful tool for plaintiffs to recover damages from a corporation, as it allows them to go after another entity or the personal assets of the corporation's owners. Courts are generally reluctant to pierce the corporate veil because it's an extreme remedy and undermines the principle of limited liability. However, a court may pierce the corporate veil if more than one entity operates in tandem or it find that the corporation's officers or shareholders have acted in a way that makes them undeserving of the protection of limited liability. Some common grounds for piercing the corporate veil include:
· There is no clear separation between the company and its owners
· The company's actions were fraudulent or wrongful
· The company's creditors were unfairly impacted
· The company is undercapitalized or lacks sufficient financial resources
A common mistake made by owners of corporations is not understanding the effects of comingling corporate opportunities, assets and resources. This can be done by sharing employees; offices, bank accounts, professionals, advertising and similar names to the extent of making it obvious the intent is to confuse the public into thinking its one company. Operating two entities this way will serve to only fool yourself if any lawyer bothers to look closely. That might happen if your liability is significant and you are running from it. Frustrating creditors isn’t particularly difficult for the “professional” dead beat, but it just may not be your cup of tea, so don’t do it. Using a dba is fine; just realize you have one entity, not two. You can call it a separate division, affiliate, sister company, whatever you want; it’s one entity. This comes up, as you note, when one company buys another. It also comes up when an alarm company wants to separate its installation and service business from its monitoring business. After a few probing questions it’s usually the case that the arrangement is illusory and won’t hold up if challenged. ******************************** STANDARD FORMS Alarm / Security / Fire and related Agreements click here: www.alarmcontracts.com *************************** CONCIERGE LAWYER SERVICE PROGRAM FOR THE ALARM INDUSTRY - You can check out the program and sign up here: https://www.kirschenbaumesq.com/page/concierge or contact our Program Coordinator Stacy Spector, Esq at 516 747 6700 x 304. *********************** ALARM ARTICLES: You can always read our Articles on our website at ww.kirschenbaumesq.com/page/alarm-articles updated daily ******************** THE ALARM EXCHANGE - the alarm industries leading classified and business exchange - updated daily ************************* Wondering how much your alarm company is worth? Click here: https://www.kirschenbaumesq.com/page/what-is-my-alarm-company-worth ****************************** Getting on our Email List / Email Articles archived: Many of you are forwarding these emails to friends or asking that others be added to the list. Sign up for our daily newsletter here: Sign Up. You can read articles and order alarm contracts on our web site www.alarmcontracts.com ************************** Ken Kirschenbaum,Esq Kirschenbaum & Kirschenbaum PC Attorneys at Law 200 Garden City Plaza Garden City, NY 11530 516 747 6700 x 301 ken@kirschenbaumesq.com www.KirschenbaumEsq.com
