Alter Ego Doctrine: How Entity Protection Fails Without Real Separateness
The alter ego doctrine is the legal pathway used to collapse liability shields when the facts show your company, trust administration, or SPV is not truly separate. If the entity is operated as your “second self,” courts and regulators may treat it that way.
Related DSCEU pages:
Asset Protection |
Chattel vs. Real Estate |
SPV Strategies |
Governance Gap Audit
What the alter ego doctrine means
Alter ego (“second self”) is commonly tied to piercing the corporate veil. The analysis is fact-driven: commingling, weak records, lack of formalities, and unfair outcomes are typical triggers.
IRS enforcement reality
In tax collection, alter ego concepts may be used to reach assets when the entity is indistinguishable from the taxpayer. Reference: IRS Internal Revenue Manual (IRM) 5.17.2.
Alter ego doctrine red flags (what gets challenged)
| Red flag | What it looks like | Control that reduces exposure |
|---|---|---|
| Commingling funds | Personal bills paid from entity accounts; undocumented transfers. | Separate accounts + documented intercompany agreements. |
| No authority trail | No resolutions, minutes, or signatory matrix. | Board/manager resolutions + banking resolution + role matrix. |
| Undercapitalization | Entity cannot cover normal liabilities; always “thin.” | Capital plan + reserves + insurance aligned to activity. |
| Paper-only structure | No contracts, invoices, policies, or evidence files. | Operational binder: contracts, invoices, logs, compliance artifacts. |
Definitions
Educational content only. Last updated: January 09, 2026.
Schedule a Structuring & Governance Call
Get a clear, documented path to defensible operations, bankability, and risk containment.
- Governance gaps: identify what triggers alter-ego exposure, KYC friction, and underwriting delays.
- Documentation plan: build a clean binder (authority, ownership, minutes, signatory matrix).
- Structure alignment: map operating entity vs. holding entity vs. SPV vs. trust.
Educational note: DSCEU provides education and structuring support. Engage qualified counsel and tax professionals for jurisdiction-specific legal/tax advice.