Entity Structure

[joeblow]

My question involves business law in the state of: Oregon

I work for an LLP with a handful of partners. The company has historically set up a separate LLC (call it "LeaseCo") that purchases all of our IT equipment and other FF&E. Most, but not all of the LLP partners are owners of the separate LeaseCo. The original idea behind this arrrangement was that by using LeaseCo to purchase all assets, then leasing those assets to the main LLP, the LLP could shield those assets from a potential lawsuit, should the LLP face a judgment that blows through its existing insurance coverage.

I'm trying to confirm whether this setup actually does provide any protection for those assets, or if management's belief that this arrangement provides protection is in error.

Thanks very much.

[Zigner]

My question involves business law in the state of: Oregon

I work for an LLP with a handful of partners. The company has historically set up a separate LLC (call it "LeaseCo") that purchases all of our IT equipment and other FF&E. Most, but not all of the LLP partners are owners of the separate LeaseCo. The original idea behind this arrrangement was that by using LeaseCo to purchase all assets, then leasing those assets to the main LLP, the LLP could shield those assets from a potential lawsuit, should the LLP face a judgment that blows through its existing insurance coverage.

I'm trying to confirm whether this setup actually does provide any protection for those assets, or if management's belief that this arrangement provides protection is in error.

Thanks very much.

Why does it matter to you?

[pg1067]

I'm trying to confirm whether this setup actually does provide any protection for those assets, or if management's belief that this arrangement provides protection is in error.

In the hypothetical world of all that is abstract, assets owned by Company X are not subject to a civil money judgment against Company Y. That said, someone who wants to sue Company Y might also elect to sue Company X on an alter ego or some other theory. There is no way to intelligently predict the likelihood of such a hypothetical lawsuit succeeding.

[Taxing Matters]

I'm trying to confirm whether this setup actually does provide any protection for those assets, or if management's belief that this arrangement provides protection is in error.

Assuming everything was done perfectly it would indeed help shield those assets. But there are, as pg1067 points out, doctrines a creditor can use to try to go after those assets should everything not be done perfectly. At a minimum, though, it would put a few more hurdles in the path of the creditor trying to reach those assets.

[adjusterjack]

Why does it matter to you?

Why does it matter to you why it matters to him?

[Zigner]

Why does it matter to you why it matters to him?

Because, if he is in a position where it DOES matter, then he should be speaking to corporate counsel. If he is in a position where it doesn't matter, then it's really none of his business. Prodding could get him fired. Lastly, if he is in a position where it doesn't matter, but the owner(s) have asked for his input, then he should tactfully bow out, as he cannot provide legal advice.

[joeblow]

Thanks for the replies, I appreciate it. And Zigner, thanks for nothing.

[Zigner]

Thanks for the replies, I appreciate it. And Zigner, thanks for nothing.

One is glad to be of service.