Hiding behind the Corporate Veil: A Guide for Non-Profit Corporations with For-Profit Subsidiaries

The non-profit sector is ripe for abuse due to non-profit organizations\u27 unique regulatory positions, favorable tax treatment, and potential to earn large profits. For example, private foundations have become large repositories of untaxed wealth that accumulate great economic power. Additionally, dozens of non-profit directors and executives are also officers of outside companies that engage in business activities with non-profit organizations. This article addresses an emerging and complex problem surrounding non-profit corporations: whether or not a party should be able to pierce the corporate veil of a non-profit corporation for actions of their for-profit subsidiary. It also looks at the underlying premises, responsibilities and standards of both non-profit and for-profit corporations. It will then attempt to reconcile the two areas of law and argue that the equitable remedy of piercing the corporate veil should be available in the non-profit sector. To conclude, this article proposes a number of changes in the regulations to attach greater liability to officers of non-profit organizations, and to increase responsibility while reducing abuse