Federal Court Cases on LLC Piercing

Q: What is LLC veil piercing?

A court order disregarding the LLC's separate legal identity and holding members or managers personally liable for LLC debts. Available when the LLC was used as a sham, was undercapitalised, commingled funds with owners, or perpetrated fraud.

Q: What was the holding in Olmstead v. FTC?

The Florida Supreme Court held that the charging order is NOT the exclusive remedy of a creditor of a single-member LLC. Creditors could levy directly on the membership interest. This weakened single-member LLC asset protection and prompted other states to explicitly codify exclusivity.

Q: How do Wyoming and Nevada respond to Olmstead?

Both states explicitly codified charging-order exclusivity for single-member LLCs: Wyo. Stat. § 17-29-503 and Nev. Rev. Stat. § 86.501. This is the principal asset-protection advantage of those states.

Q: What factors do courts examine when deciding whether to pierce an LLC veil?

Commingling of funds, undercapitalisation, failure to follow formalities, use to perpetrate fraud, absence of records, and personal use of LLC assets. Maintaining clean books, a proper operating agreement, and separate bank accounts dramatically reduces piercing risk.

Q: Does forming in Wyoming protect against piercing?

It strengthens protection but does not eliminate piercing risk. Wyoming has favourable statutes and Kaycee Land & Livestock case law applying corporate piercing standards. Good corporate hygiene (clean books, OA, separate bank account) remains essential.

Federal Court Cases on LLC Piercing — Anonymousllc.co's 2026 reference. Covers the rule, the controlling statute or regulation, common questions, and how Anonymousllc.co handles it in practice. Primary-source citations linked throughout.

By Alif Al Razi, Tax & Compliance Lead · Last updated 2026-05-21

Federal court cases on LLC veil piercing

LLC veil-piercing case law sits at the intersection of state corporate law and federal procedural rules. Federal courts generally apply the substantive law of the state of formation. This page indexes the leading federal opinions and state Supreme Court rulings that shape current LLC veil-piercing doctrine in 2026.

Olmstead v. FTC (Fla. 2010) — single-member charging order weakened

The Florida Supreme Court in Olmstead v. FTC, No. SC08-1009 (2010) held that the charging order is NOT the exclusive remedy of a creditor of a single-member LLC under Florida law. Creditors could levy and execute on the membership interest directly, effectively transferring ownership. This ruling caused several states (Wyoming, Nevada, Alaska, South Dakota, Delaware via amendment) to explicitly codify single-member charging-order exclusivity.

Sources

Olmstead v. FTC, SC08-1009 (Fla. 2010)

In re Ashley Albright (Bankr. D. Colo. 2003) — single-member LLC piercing in bankruptcy

In re Ashley Albright, 291 B.R. 538 (Bankr. D. Colo. 2003) held that the bankruptcy trustee of a single-member LLC's sole member could exercise all member rights, effectively dissolving the LLC and reaching assets. This was an early signal of the single-member LLC's weaker asset-protection profile and a major driver of why founders choose Wyoming or Nevada.

Kaycee Land & Livestock v. Flahive (Wyo. 2002) — Wyoming permits piercing

The Wyoming Supreme Court in Kaycee Land & Livestock v. Flahive, 46 P.3d 323 (Wyo. 2002) held that LLC veil-piercing is available under Wyoming law on the same theory as corporate veil-piercing. The court found no statutory basis to distinguish LLCs from corporations for piercing purposes. This is the leading Wyoming LLC piercing case.

NLRB v. Greater Kansas City Roofing — instrumentality test

NLRB v. Greater Kansas City Roofing, 2 F.3d 1047 (10th Cir. 1993) — although a corporate case, it articulated the 'instrumentality' test that federal courts widely apply to LLC piercing: (1) unity of interest and ownership such that separate personalities no longer exist; (2) circumstances such that adherence to separate identity would sanction fraud or promote injustice.

Common veil-piercing factors

Federal courts applying state law typically examine: (1) commingling of personal and LLC funds; (2) undercapitalisation at formation; (3) failure to follow operating-agreement formalities; (4) use of the LLC to perpetrate fraud; (5) absence of LLC records; (6) personal use of LLC assets. Anonymousllc.co's standard operating agreement and bookkeeping setup guide help clients avoid these factors.