In a word, yes. To pierce the veil of your LLC or corporation, however, a funding company must prove that the entity was the alter ego of the owner and that failure to pierce would sanction a fraud or promote an injustice. Pennsylvania courts are reluctant to do it, and we can't find a reported case where a funder successfully pierced a merchant's veil.
Most funders never need to pierce the veil because they get a personal guarantee when the MCA is signed. If you signed one, see our page on enforceability of personal guarantees of MCAs. This page covers owners who signed no guarantee, or whose guarantee isn't triggered.
Can a funding company pierce the corporate veil if I didn't sign a personal guarantee?
Only by piercing the veil or showing you did something wrong yourself. The Pennsylvania LLC Act provides that a member is not personally liable for the company's debts "solely by reason of being or acting as a member or manager," whether the LLC has one member or several and even after it is dissolved. 15 Pa.C.S. § 8834(a). Similarly, a corporation is separate "even if its stock is owned entirely by one person." Lumax Industries, Inc. v. Aultman, 669 A.2d 893 (Pa. 1995). See also our page on the three ways a business owner becomes personally liable for MCA debt.
What does a funder have to prove to pierce the veil in Pennsylvania?
On May 22, 2026, the Supreme Court of Pennsylvania unanimously restated the test. The party seeking to pierce must show (1) "such unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist," and (2) that adherence to the corporate fiction "would sanction fraud or promote injustice." In re Dravo LLC-Derivative Claims, No. 33 WAP 2024 (Pa. May 22, 2026).
Courts consider a number of factors:
| Factors considered by courts | Potential MCA examples |
|---|
| Undercapitalization | Merchant takes multiple MCAs and moves the proceeds to the owner, leaving too little to pay the entity's obligations |
| Failure to observe corporate formalities | Little weight for LLCs in Pennsylvania |
| Substantial intermingling of corporate and personal affairs | Owner pays the mortgage or car payment from the debit account, or deposits MCA receivables into a personal account |
| Use of corporate form to perpetrate a fraud | Merchant forms a new LLC to obtain funding, or moves the defaulting entity's assets to a new entity |
Fraud is not required. As Dravo put it, "Pennsylvania courts will disregard the corporate form whenever it is necessary to avoid injustice." In Lumax, the court found that the owner being "the only person actively involved in the day-to-day operations" was "irrelevant and immaterial" and reversed a $70,000 verdict against him.
Does it matter that my LLC never held meetings or kept minutes?
Not really. The Pennsylvania LLC Act provides that a company's failure to observe formalities "is not a ground for imposing liability" on a member or manager. 15 Pa.C.S. § 8106. In Dravo, the Supreme Court noted in a footnote that for an LLC this factor "weighs less, if at all." Mixing funds, draining assets and misusing the entity are what expose an LLC owner.
Can a funder pierce the corporate veil of one LLC to get to another LLC that I own?
Perhaps. As Dravo noted, in Mortimer v. McCool, 255 A.3d 261 (Pa. 2021), the Court adopted the enterprise theory of veil piercing, so older commentary saying otherwise is out of date. If you operate multiple entities as one enterprise, a court may pierce one entity's veil to reach the others. Warning signs include:
- one bank account paying payroll, rent and MCA debits for every entity;
- receivables from all the companies deposited into the account of the one that signed the MCA; or
- no separate books for each entity.
Will they need to sue my business first and win before piercing the corporate veil?
Dravo, quoting prior cases, holds that a request to pierce the veil "is not an independent cause of action" but "a means of imposing liability established in an underlying cause of action." The funder needs a viable cause of action against your business, and contract defenses, such as the agreement being a loan, apply to veil piercing too.
New York courts, whose law many MCA contracts choose, also reject thin veil allegations. In P & HR Solutions v. Ram Capital Funding, LLC (N.Y. App. Div. 2021), the court dismissed contract claims against a company member built on "conclusory allegations merely reciting typical veil-piercing factors." There merchants sued a funder's principal, but the rule cuts both ways.
Can the funder sue me for anything besides piercing the corporate veil?
You could be liable for your own acts, as discussed in Wicks v. Milzoco Builders, Inc. (Pa. 1983). An officer is liable for misfeasance "as an actor rather than as an owner," but not for "mere nonfeasance." Filing a false application or diverting the receivables the funder purchased could be misfeasance. Transfers to insiders, or made after being sued or threatened with suit, are badges of fraud under Pennsylvania's fraudulent transfer statute, 12 Pa.C.S. 5104, so diverting funds to yourself after defaulting could be fraudulent.
As of Sept. 28, 2026, a CourtListener search turned up only 6 opinions mentioning both merchant cash advance and veil piercing or alter ego, and none found a merchant's owner liable as an alter ego. Trial court rulings are poorly covered there, but separate accounts, documented draws and some of your own money in the business make it very unlikely.
Frequently asked questions about veil piercing
I didn't hold meetings or keep minutes for my LLC. Will they pierce the veil for that?
Probably not. Section 8106 of the Pennsylvania LLC Law says a failure to observe formalities "is not a ground for imposing liability" on a member or manager, and Dravo said that factor matters less for LLCs, if at all.
I paid a few installments from my personal account. Is that commingling of funds?
Probably not. The Pennsylvania factor is substantial intermingling of corporate and personal affairs, and a few payments from a personal account probably don't qualify, unlike running your mortgage, car and payroll through one account.
If I dissolve my LLC will they be able to sue me?
Not just because you dissolved it. Pennsylvania's member protection survives dissolution. If you dissolve it properly and publish notice, claims against the LLC that aren't brought within 2 years are barred. But if you transfer the LLC's assets to yourself, that could be a fraudulent transfer.
Isn't veil piercing the same as suing me for fraud?
No. In veil piercing the funder claims you are really the LLC, its alter ego, while in fraud they sue you for something you did, such as filing a false application. Under the Pennsylvania participation theory they need to show misfeasance, so not paying the MCA isn't enough.