Can a Pennsylvania corporation or LLC lose its liability protection?

Absolutely. Piercing the corporate veil occurs when a court determines that a corporation or LLC has been improperly used to shield its owners from personal liability, allowing creditors and claimants to pursue the personal assets of the members or shareholders. When a creditor seeks to pierce the corporate veil, the court will look at several factors to help make its determination, including lack of separation between the company and its owners, undercapitalization, failure to observe corporate formalities, commingling of funds, and fraudulent or illegal activities. Additionally, in November 2022, Pennsylvania law was amended to add an annual reporting requirement for corporations, LLCs, and partnerships commencing in 2024. Under this new law, all business entities must file an annual report with the Pennsylvania Department of State or risk involuntary dissolution or cancellation proceedings and loss of their limited liability protection.