Piercing the LLC Veil: Avoiding Member Liability for Business Debts

This CLE course will discuss the latest legal trends across several states regarding piercing the LLC veil, reverse piercing the LLC veil, and outline best practices for LLCs and LLC members to avoid personal liability for business debts and for LLCs to avoid becoming liable for a member’s obligations.

Although LLCs are supposed to provide increased protection from personal liability, courts are increasingly treating LLCs and corporations as equivalent entities, including applying the "piercing the corporate veil" theory to both business structures. When the LLC veil is pierced, litigants engaged in disputes with or owed debts by LLCs can look beyond the entity and pursue LLC members for potential liability and recovery.

Laws in this area are not applied consistently and there are no bright line rules. However, counsel to LLCs and LLC members may minimize the likelihood of veil-piercing claims by strictly adhering to LLC formalities, separating LLC assets from personal assets, executing a tight LLC operating agreement, and avoiding any personal guarantees of the LLC's debt.

Listen as our authoritative panel explains the circumstances under which the LLC veil may be pierced and how state courts are ruling in LLC veil-piercing cases. The panel will discuss considerations and best practices for LLC members to avoid and defend veil-piercing claims.