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> > those single member LLCs may be surprised to find the assets of their single member LLC at risk for their personal liabilities > Not to discount that but a

> > those single member LLCs may be surprised to find the assets of their single member LLC at risk for their personal liabilities > Not to discount that but aren't LLCs usually formed to avoid personal liability for company liabilities? That’s officially why they’re formed, but that doesn’t mean they provide what the owner expects. Years ago, when I was a bank teller, I noticed that one of our clients — a CPA — had not incorporated her business, or set up an LLC, LLP, etc. She mentioned that the limited liability wasn’t absolute; people are often able to pierce the veil ( http://lawprofessors.typepad.com/business_law/2017/11/no-need-to-veil-pierce-an-llc-when-direct-liability-is-available-and-llcs-are-still-not-corps.html http://lawprofessors.typepad.com/business_law/2017/11/no-nee... ), so she wasn’t convinced it was worth the trouble. I found out later that courts are willing to pierce the veil in cases that don’t make sense (often, the courts pierce the veil for contract lawsuits where the injured party failed to write in the contract that the LLC’s owners would personally guarantee the performance, but if a car owned by an LLC was in an accident, courts would respect the limited liability; this seems backward since the victim of the accident didn’t pass up a chance to get the owner to personally take liability: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=236967 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=236967 ).

mkirklions 9y ago
If you separate everything, I dont expect lawyers to take your home upon something awful happening. Ive heard the stories of LLCs going bankrupt, but I dont know of people losing their personal assets.
dragonwriter 9y ago
If the LLC members personally guarantee performance, piercing the veil isn't involved (because they are personally liable ab initio.) If they don't, standard analysis of both the way the company is operated is done, the same as would occur with a noncontract liability where veil-piercing is sought. So, it's certainly possible for the veil to be pierced in a contract case but not an auto accident liability case, but it's just as possible the other way around. The features you've specified and intuited are the basis for the decision to pierce the veil (and from which you have concluded that the logic is reversed from what would make sense if you were deciding based on those features) simply are not the ones that control the determination of whether the veil will be pierced.
- maxlybbert 9y ago
  > If the LLC members personally guarantee performance, piercing the veil isn't involved (because they are personally liable ab initio.) I agree. That’s half my point: why set up an LLC if every bank and company you deal with has you personally accept liability anyway? > If they don't, standard analysis of both the way the company is operated is done, the same as would occur with a noncontract liability where veil-piercing is sought. That’s how it’s supposed to work, yes. > So, it's certainly possible for the veil to be pierced in a contract case but not an auto accident liability case, but it's just as possible the other way around. The features you've specified and intuited are the basis for the decision to pierce the veil. I’m not the one doing the intuiting; it was one of UCLA’s corporate law professors. I will acknowledge that his proposal is twenty years old, and the “intuition aspect” is based on whether the approaches used by various states actually achieve the expected policy outcome. That is, if the courts don’t decide whether to pierce the veil based on questions like “is this simply an attempt to get another bite at the apple?” then it’s hardly a surprise that many attempts to get a second bite at the apple succeed. And if the question of whether I can personally sue the owner of a pizza restaurant or have to live with the restaurant’s limited liability is based on whether he has copies of the minutes from his formal board meetings, it’s likely that the decision to pierce or not to pierce won’t actually advance the desired policies. ---- It does look like I had the wrong paper, though. The one I linked to makes the argument that veil piercing is unprincipled, but https://scholarship.law.berkeley.edu/cgi/viewcontent.cgi?article=1068&context=bblj https://scholarship.law.berkeley.edu/cgi/viewcontent.cgi?art... gives the numbers (eight years old, at this point).
  - dragonwriter 9y ago
    > That’s half my point: why set up an LLC if every bank and company you deal with has you personally accept liability anyway? Tort liability (like copyright claims, employment-law claims, and, from. your example, personal injury and property damage claims.)
    - maxlybbert 9y ago
      In the case of the CPA I knew, she wasn’t worried about personal injury claims against her from people she didn’t know. Obviously, other jobs are more exposed to personal injury claims (and, potentially, a non-client could slip on her front steps, so she wasn’t completely in the clear).

mkirklions 9y ago

If you separate everything, I dont expect lawyers to take your home upon something awful happening. Ive heard the stories of LLCs going bankrupt, but I dont know of people losing their personal assets.

dragonwriter 9y ago

If the LLC members personally guarantee performance, piercing the veil isn't involved (because they are personally liable ab initio.) If they don't, standard analysis of both the way the company is operated is done, the same as would occur with a noncontract liability where veil-piercing is sought. So, it's certainly possible for the veil to be pierced in a contract case but not an auto accident liability case, but it's just as possible the other way around. The features you've specified and intuited are the basis for the decision to pierce the veil (and from which you have concluded that the logic is reversed from what would make sense if you were deciding based on those features) simply are not the ones that control the determination of whether the veil will be pierced.

maxlybbert 9y ago
> If the LLC members personally guarantee performance, piercing the veil isn't involved (because they are personally liable ab initio.) I agree. That’s half my point: why set up an LLC if every bank and company you deal with has you personally accept liability anyway? > If they don't, standard analysis of both the way the company is operated is done, the same as would occur with a noncontract liability where veil-piercing is sought. That’s how it’s supposed to work, yes. > So, it's certainly possible for the veil to be pierced in a contract case but not an auto accident liability case, but it's just as possible the other way around. The features you've specified and intuited are the basis for the decision to pierce the veil. I’m not the one doing the intuiting; it was one of UCLA’s corporate law professors. I will acknowledge that his proposal is twenty years old, and the “intuition aspect” is based on whether the approaches used by various states actually achieve the expected policy outcome. That is, if the courts don’t decide whether to pierce the veil based on questions like “is this simply an attempt to get another bite at the apple?” then it’s hardly a surprise that many attempts to get a second bite at the apple succeed. And if the question of whether I can personally sue the owner of a pizza restaurant or have to live with the restaurant’s limited liability is based on whether he has copies of the minutes from his formal board meetings, it’s likely that the decision to pierce or not to pierce won’t actually advance the desired policies. ---- It does look like I had the wrong paper, though. The one I linked to makes the argument that veil piercing is unprincipled, but https://scholarship.law.berkeley.edu/cgi/viewcontent.cgi?article=1068&context=bblj https://scholarship.law.berkeley.edu/cgi/viewcontent.cgi?art... gives the numbers (eight years old, at this point).
- dragonwriter 9y ago
  > That’s half my point: why set up an LLC if every bank and company you deal with has you personally accept liability anyway? Tort liability (like copyright claims, employment-law claims, and, from. your example, personal injury and property damage claims.)
  - maxlybbert 9y ago
    In the case of the CPA I knew, she wasn’t worried about personal injury claims against her from people she didn’t know. Obviously, other jobs are more exposed to personal injury claims (and, potentially, a non-client could slip on her front steps, so she wasn’t completely in the clear).