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3 DePaul Bus. & Comm. L.J. 51 (2004-2005)
Piercing the Veil of Limited Liability Companies: The Need for a Better Standard

handle is hein.journals/depbcl3 and id is 63 raw text is: Piercing the Veil of Limited Liability Companies: The Need for a Better Standard Jeffrey K. Vandervoort If truth were not often suggested by error, if old implements could not be adjusted to new uses, human progress would be slow. Oliver Wendell Holmes The Common Law, 18811 I. INTRODUCTION With the advent of the limited liability company (LLC) has come a flurry of changes in tax law, business law, and administrative proce- dure in an attempt to adapt our system to this new form of entity. From the date of the LLC's arrival in the United States, changes were necessary due in part to the fact that the LLC is essentially a hybrid, combining characteristics of both partnerships and corporations. As such, the LLC could not be easily categorized by regulators, courts and legislators. The statutory grant of limited liability to an unincor- porated entity is one example of how the law has changed. From a tax perspective, in 1996, the Treasury Department and the IRS made a monumental change in issuing the Check the Box regulations, effec- tively giving taxpayers the ability to select the tax treatment for their eligible LLC. Yet despite the significant changes that have been made to welcome the LLC into the business mainstream, other areas have lagged be- hind. One such area is the equitable doctrine of piercing the veil of limited liability. Borrowing from the common law of corporations, state legislatures and courts have opted to apply the doctrine of pierc- ing the corporate veil to LLC's. However, application of the piercing standards to LLC's has not exactly been smooth sailing. As this arti- cle will discuss in greater detail, courts and legislatures have had to consider the fact that some of the traditional veil piercing standards that appear to make sense in the context of corporations, do not make sense in the context of the LLC. For some commentators, this lack of fit between the corporate veil piercing standards and the LLC has called the entire system into question. 1. THE QUOTABLE LAWYER, 37 (David S. Shrager & Elizabeth Frost eds., 1986).

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