Florida Bar Examination

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A member and manager of a Florida LLC consistently uses the LLC's bank account to pay for personal expenses, including vacations, groceries, and car payments, without documenting them as loans or distributions. A business creditor obtains a judgment against the LLC that the LLC cannot pay. The creditor sues the member personally. To prevail and 'pierce the veil,' what must the creditor prove?

Only that the LLC was undercapitalized from its inception. That the LLC failed to hold and document annual meetings. That the member dominated the LLC to the point it was a mere alter ego, and that this was done for an improper purpose which caused the creditor's loss. Only that the member commingled personal and business funds.

Correct Answer:

That the member dominated the LLC to the point it was a mere alter ego, and that this was done for an improper purpose which caused the creditor's loss.

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