Is An LLC A Wise Decision When Piercing The Corporate Veil?

One of my last blogs focused on, “Should I use an LLC for my rental properties?”. One of the comments questioned whether an LLC was a wise decision where a creditor would pierce the corporate veil. Piercing the corporate veil occurs when a creditor attempts to violate the general rule of a corporation or LLC having business liability and shielding a person from personal liability on their personal assets. Simply put, piercing the corporate veil happens when a creditor attempts to sue a corporation or LLC owner and go after their personal assets.

LLC and Business Liability Protection is the General Rule


The general rule of an LLC is it provides business liability protection from real estate losses or creditors’ claims. The concept of an LLC is simple. One of the benefits of an LLC is the ability to insulate personal assets from business or real estate liability exposure.

In my experience, piercing the corporate veil is extremely difficult to achieve. In many cases, a creditor’s attorney will attempt to sue the LLC and each individual owner of the LLC. This practice is against the general rule of an LLC providing business liability protection against one’s personal assets. This is one reason why we advise against married couples each owning a share of the LLC. With a married couple sharing an interest in the LLC, it increases the likelihood of both individuals being named in a lawsuit.

Asset Protection and Benefits of Liability Protection Strategies

The major benefit of asset protection and setting up an LLC is to protect a family’s wealth. Creating an LLC is one method (of several) that increases the asset protection and wealth from real estate liabilities or other liability concerns. Most people find the protection of creating an LLC as sufficient.

Individuals and families that have multiple properties should also consider purchasing an umbrella policy. An umbrella policy is a type of insurance policy, which protects a family’s finances from lawsuits. An umbrella policy should be a supplemental policy, which supplements the general liability insurance policy of the LLC. A critical benefit of an umbrella policy is the ability to pay for defense costs. The high defense cost may deter individuals seeking to hire an attorney to represent them.   However, not hiring an attorney to represent the individual and/or the LLC is a major factor contributing to piercing the corporate veil and the judge entering default judgments and parties entering bad settlements.

Setting up a Land Trust coupled with the LLC being the beneficial owner is an additional asset protection strategy. A Land Trust, in Illinois, is a form of liability protection for real estate owners, which provides privacy and helps to prevent liens from attaching to property.

A major mistake of most LLC owners is having title in one’s joint or personal names. A judgment that attaches will produce a lien against joint owners or individuals of all properties owned by those joint owners or individuals.

Real estate owners may ask the question: “Why should we protect our real estate investments?” My answer is financial and economic security to protect against one lawsuit threatening your family’s economic security. One lawsuit can threaten your family’s hard-work and wise decision-making. Recessions, lawsuits, and pandemics are risks that are difficult to ascertain.

Skilled and Experienced Real Estate Landlord Asset Protection Law Firm


When you are considering asset protection and the establishment of LLCs, Gateville Law Firm is your best choice. Attorney Sean Robertson is the Principal of Gateville Law Firm and he has exceptional experience with a litigation background assisting real estate property owners and landlords in protecting their personal assets from lawsuits. The law firm’s asset protection skillset is a major reason why landlords choose Gateville Law Firm.



Helpful? Share with others.