Recently, I saw a flyer for an upcoming performance of George Gershwin’s Porgy and Bess, a remarkable opera based upon DuBose Heyward’s[1] 1925 novel, Porgy.  Porgy and Bess was at the time of its first performance, extremely progressive, as it featured a cast consisting entirely of classically-trained African-American singers though it was considered by others to be racist.

In his will Gershwin stated that the opera was to be performed only by an entirely black cast, which may be seen as a desire to provide opportunities for talented singers who traditionally have been underrepresented in opera[2]  Nevertheless, the controversy surrounding Porgy and Bess continued until Houston Opera managed in 1976 to assemble a cast of classically-trained African-American performers from around the US who were willing to perform in the opera. 

The report of an upcoming performance brought back fond memories, as I was fortunate to be among the violinists in the pit orchestra for more than a dozen sell-out performances of Porgy and Bess with an African-American cast at Indiana University in 1980. Those performances drew an audience from as far as New York City, as Metropolitan Opera would not undertake a performance Porgy and Bess with the required all-black cast for five more years.[3]

Playing in a pit orchestra is very different from performing in an orchestra on stage. For the uninitiated, an orchestra pit is located in between the front row of chairs and the stage. Typically, the orchestra pit floor is at least 4-5 feet lower than the floor of the seating area, usually sunk low enough that only the top of the conductor’s head is visible to those on the stage.  Frequently, the pit will be even lower so that it is entered from and extends below the stage so the winds and percussion typically will be sitting under the stage.

Orchestra pits are notoriously cramped quarters and sometimes loud acoustics (imagine trumpets and percussion playing in closed quarters).  Further, because the orchestra pit is in effect in the basement and is not lit during the performance (musicians use small stand lights to read the music), the audience cannot see what the musicians are doing.  As a result, it is not unusual for wind players and percussionists, who may have lengthy rest periods, to read books, knit, work on their reeds, or otherwise quietly entertain themselves while their colleagues in the violin and other sections perform pretty much continuously. 

These conditions, a need for pit space for staging, and improved technology have brought with them an even stranger, phenomenon -- pit musicians who are not even in the orchestra pit during the performance. Rather, they perform in another part of the theater, taking cues by a live-stream of the vocalists and having their performances piped in real-time back into the theater all but instantaneously.[4] If it was difficult for the audience to tell who was performing the music with a traditional pit orchestra, it may well be impossible for the uninitiated to tell the difference between a live, “remote pit orchestra” and piped-in music.

Corporations and limited liability companies (which I will refer to collectively as a company) can be like a pit orchestra.  Depending upon how they are set up, it may or may not be obvious who is behind them. What is referred to as a “corporate veil” protects the shareholders, manager, and members of a company from undesired personal liability for company obligations.  The corporate veil also separates what may be unknown owners from obligations that the company has assumed.  

Sometimes, however, a company’s creditors may be able to lift, pass through or “pierce” the corporate veil to impose liability on the company’s owners. Typically, this occurs where business owners have failed to observe the separateness of the company from the owners.

Piercing of the corporate veil can occur with single member limited liability companies or single-shareholder corporations where the owners fail to separate company assets from their own.  Other times, the corporate veil may be pierced where the company’s owners have removed assets from the company or have committed fraud or other wrongful acts.

Nevertheless, since protection of the owners from liability is the reason for setting up a business in corporate or limited liability company format to begin with, it is important that all companies take steps to assure that protection remains intact. A clear delineation between the company and related parties can go a long way in preventing creditors from piercing the corporate veil and pursuing claims against the company’s owner(s) and affiliate(s).  A company can minimize the likelihood of someone piercing the corporate veil through careful business operations, including the following:

1. Start out with adequate capitalization so that the company can support its needs.  If additional capital is needed, obtain it through well-documented loans or formal capital contributions from the owners.
2. Work with the company’s attorney to assure not only that appropriate by-laws or operating agreements are in place, but that appropriate corporate governance, such as minute books, stock ledgers, board meetings, corporate resolutions, and other business formalities, are observed on an ongoing basis.
3. Hold the business out to others as a separate company, with separate letterhead, business cards, contracts, and leases.
4. Assure that the company’s assets are not comingled with those of the owners or any other business.  Open a separate bank account for the business and make sure that company revenues and expenses are deposited into and paid from that bank account. Do not use that bank account to pay the owners’ personal bills. Rather, make distributions to the owners and have the owners pay their personal expenses from their personal bank accounts.
5. Do not make distributions to owners if that would result in the company being unable to pay its obligations. This can result in a claim for fraudulent conveyance.
6. If an affiliate’s employees are expected to perform services for the company, have the company’s attorney prepare written contract that describes the services and the amount to be paid for them.  Make sure the contract is honored and the bills are actually paid.
7. Corporations and limited liability companies are formed because their owners wish to limit their liability for business obligations. However, forming the company is just the beginning.   Retaining that limited liability requires the guidance of an experienced business attorney, good legal documentation, and careful business operations on an ongoing basis.

[1]  OPERA GEEK FACTS: Deboise Heyward was an early 20th century American author from South Carolina and is most famous for his novel, Porgy, which was set in the African-American community in Charleston. Together with his wife, Dorothy, a playwright he met at an artists’ colony, adapted Porgy to a play called Porgy and Bess, which formed the basis of the opera by the same name. Although Heyward was the descendant of a signer of the US Declaration of Independence who was a South Carolina plantation owner, many of his writings centered around the Gullah people of South Carolina’s low country. Heyward was recognized posthumously by the My Hero Project, which seeks to use “media, art and technology to celebrate the best of humanity, one story at a time.”  

[2]  The opera has been performed, with some controversy by all white casts in Europe, as noted by Alexandra Ivanoff in “Porgy and Bess” with a White Cast Stirs Controversy, New York Times January 30, 2018.

[3] George Gershwin reportedly turned down a commission to have Metropolitan Opera perform Porgy and Bess in 1935, because it would have been done in blackface.

[4]   See  Patrick Healy, To Clear Space, a Pit Orchestra in the Basement, New York Times March 23, 2012.