We can all recall law school lectures on the panoply of business forms available to entities seeking to incorporate. This foundational decision impacts how the entity will be governed and, ultimately, how its liabilities will be allocated. Somewhere along the way, however, the salutary purpose of permitting businesses to incorporate as they see fit devolved into complex corporate labyrinths erected by organizations to escape liability for their own misconduct.
In theory, corporate subsidiaries and affiliates are separate and distinct. When these entities run as free-standing, self-governed organizations manned by their own employees that operate as a going concern such that the entities have a separate existence from their corporate parent, the law respects the corporate form. However, when corporations create a pyramid of empty shells to shield the only viable entity from the consequences of their own misconduct, the law provides a very powerful, albeit cautiously invoked remedy: corporate veil piercing.
