The advent of the limited liability company (“LLC”) in the 1980s has had far-reaching implications for how individuals choose to form business entities. Never before has there existed such a malleable legal entity that provides both limited liability and exemption from double taxation. Indeed, since the passage of the first LLC act in 1977, all fifty states and the District of Columbia have followed suit. The LLC is now viewed as the business entity of choice for small operations. However, while the flexibility offered by an LLC is the source of great appeal for members, it has also posed unique challenges for courts that are, in many cases, deciding issues of first impression in the LLC context.
One especially vexing issue facing the courts is determining just how limited “limited liability” ought to be. In particular, courts are now determining whether, and to what extent, the equitable doctrine of veil piercing should be carried over from corporate law into the realm of the LLC. In North Carolina, like in many other states, LLC litigation has been slow to materialize, and the case law is sparse in comparison to the plethora of material on corporate or partnership law. Nevertheless, it is now rather clear that North Carolina courts have followed every other state in permitting veil piercing in the LLC context, though they have failed to give special consideration to the peculiarities of the LLC, as have the courts of some other states. This Comment will consider the nature and scope of LLC veil piercing in North Carolina with a particular emphasis on its ineffective implementation and questionable application in certain contexts.
