Personal withdrawal liability of LLC members

[Guest Sieve]

Employers A, B, C, D and E are members of a controlled group. Employer A, a C corporation, participates in Multiemployer Plan X, while Employers B, C, D & E neither sponsor a qualified plan nor participate in Plan X. Employer A ceases to do business, and has a large withdrwawal liability from Plan X--the shareholders of Employer A do not have personal liability, because Employer A is a corporation (assuming no fraudulent transactions). Employers B, C, D & E, as members of the controlled group which includes Employer A, share Employer A's withdrawal liability. Employer B is a partnership, Employer C is an LLC taxed as a corporation, Employer D is an LLC taxed as a partnership, and Employer E is an S corporation. Here is how I analyze (or don't analyze) the withdrawal liability of the individuals who own Employers B, C, D & E:

• Employer B, the partnership, passes through its liability to the individual partners.
  
• Employer C, the LLC taxed as a corporation, passes through no liability to its members.
  
• How about Employer D, the LLC taxed as a partnership? Does its LLC status protect the individual members from personal liability, or is the fact that Employer D is taxed as a partnership cause the members to have individual libaility in the same manner is if Employer D were, in fact, a partnership?
  
• And how about Employer E, the S corporation? Are its shareholders treated as partners so that they have individual liability?
  

Any thoughts, comments?

[jpod]

If you look at the court decisions where general partners were stuck with liability, it was by virtue of their liability under State law for liabilities of their partnerships. So, I don't think you'll find any authority in the cases (or the statute) for making LLC members liable notwithstanding the LLC's tax treatment as a partnership (and the possible carryover effect of that tax treatment for other Title IV purposes).

[Mike Preston]

Would kind of lay waste to the concept of LLC, wouldn't it?

[Guest Sieve]

Wouldn't be the first time that ERISA preemption turned the world upside down . . .

[J Simmons]

For how imaginitive some multiemployer plan trustees get in trying to pierce the veil, see Board of Trustees of the Western Conference of Teamsters Pension Trust Fund v Lafrenz, 837 F2d 892 (9th Cir 1988). Note, other circuits had refused to follow the result of the Lafrenz case. You can find them by shepardizing the citation.