Piercing the veil isn't as difficult as many LLC owners assume.
My clients usually plan to use a limited liability company to own their aircraft, assuming the LLC will protect them from personal liability. Yet they often do not realize that an LLC is far from a bulletproof shield.
Although LLCs can provide barriers to private third-party claims against their owners, the reality is that certain claimants may cut through an LLC to reach the personal assets of the owner/members and other related parties. Perhaps more concerning, the U.S. government has regulatory and statutory authority that may extend personal liability to more individuals and entities than just owners, including their officers, directors, managers, pilots, and aircraft operators.
This personal liability exposure may come from three or more directions. First, third parties—including those who, for example, make claims for breach of contract, personal injury, or wrongful death—may try to “pierce the corporate veil” to reach into the pockets of LLC owners and others to pay for their claims.
Second, the FAA and the Department of Transportation can tag LLCs, LLC owners and managers, pilots, and others under the Federal Aviation Regulations (FARs) and federal statutes.
Third, the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Treasury Department, acting under the new Corporate Transparency Act (CTA), has few limits in pursuing wrongdoers under the CTA.
This article was written by NAFA member David G. Mayer, Partner at Shackelford, Bowen, McKinley & Norton, and originally published by AIN on May 10, 2024.
