The History of the LLC and Cases Questioning Its Asset Protection

William S. Forsberg (partner, Leonard Street and Deinard) has published his article entitled Asset Protection and the Limited Liability Company: Not the Panacea of Creditor Protection That You Might Think!, Prob. & Prop., Nov./Dec. 2009, at 39.  

A summary of the article is below:

In these troubled economic times, protecting one’s assets from creditor attack is as important as-maybe even more important than-saving estate taxes.  The limited liability company has long been touted as one of the best entity choices available to hold a client’s business (or nonbusiness) assets because of its asset protection benefits.  The LLC is also a very common estate planning tool for other reasons, including a streamlined and flexible management structure, favorable income tax treatment, and ease of transferability of interests.  But as explained below, the asset protection benefits of the LLC structure should not be overestimated or oversold.  This article will examine the genesis and history of the LLC as an asset protection vehicle under state law.  It also will explore some of the federal bankruptcy laws and cases in which the asset protection benefits of the LLC under state law were questioned or, worse yet, simply stripped away.