May 28, 2015

The limited liability company has become the most popular entity for a small business owner to use, and they may also offer some benefits in the form of asset protection planning. Choosing the LLC instead of a corporation structure can be a wise decision, but it raises the question of where the entity should be established. There are a few different factors to consider when opting for an LLC. 

Some states have specific language in the statutes that serves to protect single-member LLCs, such as Alaska, Wyoming, and Nevada. Wyoming in particular was a popular choice for establishment because of the low cost and also the fact that managers and members within the LLC didn’t have to be disclosed publicly. A recent court case in that state, however, raises questions about the value of continuing to use Wyoming for planning.

That court case, Greenhunter Energy, Inc. v. Western Ecosystems Technology, Inc, upheld a previous ruling that allowed the corporate veil to be pierced. A creditor was able to pierce the veil to hold a parent company responsible for the subsidiary’s debt.

Under IRS guidelines, single-member LLCs are eligible for taxation as disregarded entities. In fact, one of the major advantages of a single-member LLC is this perception of greater liability protection when compared with a corporation in conjunction with this disregarded tax treatment.

As this one case indicates, planning and current knowledge of issues is critical for the proper structure of your business. Consult with an asset protection specialist about your concerns. Schedule an appointment today at info@lawesq.net.