Still, you don’t want to be held personally liable for company tax obligations. Make certain that whoever is responsible for their payment is actually sending the checks to the IRS. You don’t want to be on the hook as a secondary responsible party. ENVIRONMENTAL The government will also pierce the veil in environmental cases. The Comprehensive Environment Response Compensation and Lia - bility Act of 1980 (sometimes called CERCLA or Superfund) is aimed at cleaning up the environment. This noble goal can get complicated very quickly. As an example, between 1986 and 1989, the insurance indus- try spent $1.3 billion on Superfund claims, of which $1 billion went to attorneys. To be clear, legal fees do not clean up the environment. Courts have had a difficult time, perhaps due to the many billions spent on litigation, wrestling with the following issues: 1. Should parent companies be held liable for their subsidiaries’ acts? 2. Should officers, directors, and shareholders be
individuals liable for their company’s acts. Overall, when you are dealing with anything related to environmental liabilities, you must be cautious. Stay out of court, if possible, for you will never be certain if your corporate protections will be respected. RETIREMENT PLANS Like payroll tax withholding, paying money (or not) into private retirement plans can also result in individual liability. The Employee Retirement Income Security Act of 1974 (ERISA) governs pension and retirement plans. Many of the best plans are negotiated by unions to both benefit their members and prove the union’s organizational value to their members. When pension obligations aren’t met, the union guys sue to protect their members and to further justify their dues. A classic case in this area would be black-hearted directors converting their workers’ pension monies for their own personal use. You easily could pierce the veil in that scenario, and you could also sue the directors directly for fraud. Cases have been brought directly against management for such frauds. But we don’t have many reported piercing cases. (Perhaps many such cases settle.) The meager record shows unions suing companies that just couldn’t make the payments. But there’s no black- hearted alter-ego
controlling individual. Instead, the companies followed all the corporate formalities but just couldn’t meet their obligations. Management tried to make it but couldn’t. Are the individual officers and directors then at fault? As one court noted, if Congress wanted to hold individuals personally responsible for unpaid pension contributions, they would have done so. Of course, if you obligate your company to fund a retirement plan, you should make the payments. At the same time, you should be adhering to all the corporate formalities, just in case things don’t work out. And know that when you invest in real estate using LLCs (as most people do), you are still obligated to follow the corporate formalities to stay protected. Don’t listen to the promoter who says LLCs have no ongoing requirements. Instead, read “Veil Not Fail” and maintain your limited liability protections. •
personally liable for the faults of their business?
3. Should successor companies be held liable for acts of their predecessors? As one commentator has stated: “Efforts to predict when courts will or will not impose liability in a corporate context under CERCLA results in little more than a roll of the dice.” It is important to know that some courts have held parent companies liable for their subsidiaries and
Garrett Sutton is a corporate attorney, asset protection expert and bestselling author who has sold more than 900,000 books to guide entrepreneurs
and investors. For more than 30 years, Sutton has run his practice assisting entrepreneurs and real estate investors in protecting their assets and maximizing their financial goals through sound management and asset protection strategies. The companies he founded, Corporate Direct and Sutton Law Center, have helped more than 10,000 clients protect their assets and incorporate their businesses.
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