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In doing so, the court is said to pierce the corporate veil. The S Corporation provisions pierce the corporate veil and allow the income to be taxed to the shareholders. The Collapsible Corporation rules also pierce the corporate veil.
Corporations are created to protect the principals from being held personally responsible for the debts and liabilities of the corporation. That protection allows a situation where creditors can lay claim to a corporation's assets, but not the personal assets shareholders of the corporation. In some circumstances, those creditors will attempt to "pierce the corporate veil...
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