Inadequate capitalization is the most important factor Inadequate capitalization is the factor most likely to cause harm Inadequate capitalization has to exist when corporation is formed—there is no obligation to add more money later Consider whether insurance is a reasonable substitute for the corporation to meet its expected financial liabilities. Failure to follow formalities, Funds siphoned or commingled Corporation functioned as a façade of shareholders so that they were treating the assets as their own. There must be some element of injustice that would occur if the shareholder was allowed to avoid personal liability. Fraud Effect of piercing the corporate veil Fraud Alter Ego Doctrine Effect of piercing the corporate veil Under certain circumstances, the court may disregard the corporate entity