Thursday, April 12, 2012
Single Shareholder Corps and Single Member LLCs are not for that Reason Subject to Piercing
Partial Codification of the Law of Piercing the Veil
In Rednour Properties, LLC v. Spangler Roof Services, LLC, No. 2009-CA-001159-MR, 2011 WL 2535330 (Ky. App. June 10, 2011, modified July 8, 2011), the Kentucky Court of Appeals justified a decision to pierce the veil of an LLC on the basis that it had a single owner who organized it for the purpose of achieving limited liability. For a general review and criticism of this decision, see Thomas E. Rutledge, The Limited Liability Shield in Kentucky Single Member LLCs Has Been Thrown into Doubt by the Court of Appeals, kentuckybusinessentitylaw.blogspot (Nov. 7, 8 and 9, 2011).
In response to this holding, the 2012 Kentucky General Assembly amended both the business corporation act and the LLC act to provide that having only a single shareholder or a single member or manager is not of itself a basis for piercing the veil. See Ky. Rev. Stat. Ann. §§ 271B.6-220(2) and 275.155(1), each as amended by 2012 Ky. H.B. 341.
As both single shareholder corporations and single member LLCs are permissible, being so organized is not a basis for piercing.