New York applies the two-prong Morris test: complete domination and control, plus use of that domination to commit a wrong causing injury. The August 2025 First Department decision in Rich v. J.A. Madison relaxed the second prong, finding that “some form of wrong that had an unfair result” can be enough — without strict proof of fraud. That shift makes the first prong, where governance records do their work, even more important to LLC owners than before.
New York’s Veil-Piercing Standard
New York’s controlling test comes from Morris v. New York State Department of Taxation & Finance, decided by the New York Court of Appeals in 1993. To pierce, a plaintiff must prove: (1) complete domination and control of the entity with respect to the transaction at issue; and (2) that domination was used to commit a fraud or wrong causing injury. New York courts emphasize that domination alone is not enough — some showing of a wrongful or unjust act toward the plaintiff is required.
The first prong examines factors familiar from other states: failure to adhere to corporate formalities, inadequate capitalization, commingling of assets, and use of corporate funds for personal purposes. The second prong has historically required something close to fraud — but in August 2025 the First Department ruled in Rich v. J.A. Madison, LLC that “some form of wrong that had an unfair result” can suffice. The dissent warned this could broaden veil-piercing law substantially.
The 2025 shift, if it holds on appeal or spreads to other departments, makes governance records more important in New York, not less. When the second prong becomes easier to satisfy, the first prong — complete domination — becomes the practical line of defense. And the first prong is the one resolved on the documentary record.
Real Cases from New York
Walkovszky v. Carlton (N.Y., 1966)
Veil NOT pierced — undercapitalization alone insufficient
This is one of the foundational New York cases. A pedestrian injured by a taxicab sought to hold the corporation’s shareholders personally liable. The taxi company carried only the statutory minimum insurance. The Court of Appeals held that undercapitalization alone is insufficient to pierce the corporate veil — the plaintiff would have needed to show the corporation was used as the shareholder’s agent to conduct business in an individual capacity. Without that additional showing, separate existence (even with thin capitalization) is respected.
What governance records would have changed the outcome: The veil held in this case, which makes it useful for showing what New York courts will not pierce based on alone. The takeaway is that documented separate operation — even of a thinly capitalized entity — defeats the “agent” argument. Annual written consents and banking resolutions document that the entity is making its own decisions through its own governance — not that it is acting as an extension of its owner.
Morris v. New York State Department of Taxation & Finance (N.Y., 1993)
Veil pierced — two-prong standard established
The New York Court of Appeals used this case to set the controlling two-prong standard. The petitioner controlled a closely held corporation and used corporate funds to purchase cabin cruisers for personal use. The court found complete domination of the corporation, used to commit a wrong — specifically, the personal-use purchases. The key holding: “domination, standing alone, is not enough; some showing of a wrongful or unjust act toward plaintiff is required.” The two-prong framework articulated here has guided New York veil-piercing decisions for more than three decades.
What governance records would have changed the outcome: The case turned on the unauthorized personal use of corporate funds. Formal resolutions authorizing any personal use of corporate assets — or, more typically, keeping corporate and personal purchases entirely separate — would have prevented the finding that the corporation was used as a personal vehicle. Distribution authorizations and banking resolutions document the difference between an authorized expenditure and an unauthorized one. That distinction is exactly what the second prong asks about.
Rich v. J.A. Madison, LLC (N.Y. App. Div. 1st Dept., 2025)
Veil pierced — relaxed second-prong standard
The First Department took a relaxed view of the second prong of Morris, holding that actual fraudulent conduct was not required — some form of wrong that had an unfair result was enough. The dissent warned that this could broaden New York veil-piercing law in ways the Court of Appeals had not signaled. The decision is recent, and other departments may not adopt the relaxed standard, but the August 2025 ruling already affects how parties are pleading and litigating veil-piercing claims in New York. If the relaxed second prong holds, the first prong — complete domination — becomes the primary defensive battleground.
What governance records would have changed the outcome: The relaxed second prong makes governance records more important, not less. If the bar for “wrong” is lowered to “unfair result,” the LLC’s documentary record becomes the main evidence on whether the first prong (complete domination) is satisfied. Annual written consents, banking resolutions, distribution authorizations, and operating-agreement compliance produce the record that defeats the domination prong before the relaxed second prong is even reached.
How to Protect Your LLC in New York
The 2025 Rich decision changes the practical calculus for New York LLC owners. Even if higher courts ultimately reject or limit the relaxed second-prong standard, plaintiffs are now pleading and arguing under it — and lower courts are working with it. The defensive response is structural: produce the first-prong evidence that defeats the “complete domination” argument, and the second prong becomes irrelevant.
The first prong is resolved on facts, and facts are resolved on records. Annual written consents document that the LLC is making its own decisions on a regular cadence, separate from its owner’s personal decisions. Banking resolutions establish that financial authority flows from documented LLC governance, not from informal owner control. Distribution authorizations record that any money taken from the LLC was authorized through formal channels. Each addresses one of the factors New York courts examine under Morris.
Without these records, your personal assets are exposed in New York — especially under the relaxed second-prong standard the First Department adopted in 2025. Minutes.llc generates the governance documents New York courts examine, signs them with a digital corporate seal, hashes them, and stores them in a private offshore jurisdiction.
Not sure if your Operating Agreement covers these protections? Check your Operating Agreement for free at CheckMy.llc — it takes 5 minutes and shows you exactly which provisions are missing.
Frequently Asked Questions
Does New York require LLCs to keep meeting minutes?
New York LLC Law §1102 requires LLCs to keep certain records, but does not specifically mandate meeting minutes. However, New York’s Morris v. NYS Department of Taxation framework lists “failure to adhere to corporate formalities” as a factor under the first prong (complete domination). The 2025 Rich v. J.A. Madison decision relaxed the second prong, making the first prong — where governance records do their work — relatively more important.
What is the standard for veil piercing in New York?
New York applies the two-prong Morris v. New York State Department of Taxation & Finance (1993) test: (1) complete domination and control with respect to the transaction; and (2) such domination was used to commit a fraud or wrong causing injury. The 2025 Rich v. J.A. Madison decision relaxed the second prong — actual fraud may no longer be required, just “some form of wrong that had an unfair result.”
Can a single-member LLC be pierced in New York?
Yes. New York applies the same Morris analysis to single-member LLCs as to multi-member entities. Sole control is treated as one factor under the first prong (complete domination), not as a complete bar to piercing. New York’s 2025 Rich decision — relaxing the wrong/injustice prong — potentially expands single-member LLC exposure where governance separateness is missing.
What records protect an LLC from veil piercing in New York?
New York courts examining the first prong of Morris look for evidence of legitimate corporate operation: separate bank accounts, formal authorization of any personal use of corporate assets, documented capital contributions, distribution authorizations recording any owner draws, and annual written consents establishing officers and ratifying decisions. The Morris case itself involved unauthorized personal use of corporate funds — documented authorization would have prevented the finding.
Does Minutes.llc provide legal advice?
No. Minutes.llc is a document automation platform, not a law firm. The information on this page is for informational purposes only and does not constitute legal advice. Veil-piercing outcomes depend on specific facts and circumstances. Consult a licensed New York attorney for legal questions specific to your situation.
Related reading: All 50 states — veil-piercing guide · The 7 Risks of LLC Veil Piercing · Why Every Owner Draw Needs a Distribution Resolution · Governance Glossary
The 2025 Rich Decision Just Made Records More Important
If New York’s second prong is now “some form of wrong with an unfair result,” the first prong is the real defense. Governance records are how you defeat the domination argument before the second prong is reached.
Create Your Record →This page is for informational purposes only and does not constitute legal advice. The cases described are based on publicly available court opinions and legal analyses. Outcomes depend on specific facts and circumstances. Minutes.llc is not a law firm and does not provide legal advice. Consult a licensed attorney for legal questions specific to your situation.