A more thorough explanation:

Alter ego is a legal concept that allows a court to disregard the separate identity of a corporation or limited liability company and hold its individual shareholders or members personally liable for the company's debts. This doctrine is applied when the court finds that the company is being used as a mere instrumentality or alter ego of its owners, rather than as a separate legal entity.

For example, suppose that John owns a small business that is incorporated as a limited liability company. John uses the company's funds to pay for his personal expenses, fails to keep proper records, and commingles his personal and business assets. If the company incurs debts that it cannot pay, a court may find that John is the alter ego of the company and pierce the corporate veil, allowing the creditors to go after John's personal assets to satisfy the company's debts.

Another example is when a group of shareholders or members use the company to commit fraud or other illegal activities. In such cases, the court may find that the company is a sham or a facade and disregard its separate identity, holding the individuals responsible for their actions.

Overall, the alter ego doctrine is a powerful tool that allows courts to prevent abuse of the corporate form and ensure that individuals are held accountable for their actions. However, it should be used with caution and only in cases where there is clear evidence of wrongdoing or abuse of the corporate form.