A person who claims I owe him money has filed a lawsuit against my California charity in an effort to recover the claim. He alleges that the charity is an "alter ego" for me personally (which is untrue) and that entitles him to the money in the charity. Is this legal?
This sounds a little unusual. Normally, when someone is trying to prove that an organization is the “alter ego” of an individual or another organization, the claimant is trying to “pierce the corporate veil” and impose liability upon the controlling individual or organization for the unjust acts of the controlled alter ego entity. (See Ready Reference Page: “How to Prevent Piercing the Corporate Veil”) You seem to be saying that this person is claiming that you have a personal obligation but the charity should pay, apparently because you are hiding assets in your alter ego charity. It doesn’t sound like a particularly promising theory, but one would have to look at the actual complaint to understand the claim. Alter ego cases are generally tough to win, but there are some circumstances where they can be successful. Without knowing more, I wouldn’t venture a guess on the odds of this one.
With pressure mounting on nonprofits to consider affiliations with other organizations, this workshop is designed to help you better navigate the world of mergers, acquisitions and affiliations. Unlike the corporate world, there are no financial "matchmakers" to help nonprofits identify successful partners for a merger. Learn more in our pre-recorded webinar.
Weekly question and answer
Notice of each full edition
and its free stories
Report on 501(c)(3) electioneering
What our readers say about Nonprofit Issues
Once again you've tackled a tricky question and explained it so we all can understand the issue.--M.V.
Thank you for your informative and keen advice on nonprofit matters. I believe it's a unique and concise place to get answers to this often wispy area called nonprofit. --R.T.
Have a question?
Other ways to
Talk to the Editor
Next Conference Call:
Wednesday, September 10, 2014
Participate in this bi-monthly telephone seminar conference call and ask your questions directly to Editor Don Kramer.
Access the entire site
($9.95/24 hours, $17.95/3 months).
Full Day Program
A well-received full-day program that covers the current hottest topics in nonprofit law. Qualifies in Pennsylvania for Continuing Education credits.
Don is available for programs and speaking engagements ranging from a one-hour presentation to a full-day primer on nonprofit law. Contact us if you are interested in having him speak at your program.