Can a Disregarded Entity Multi-Member LLC (DEMMLLC) Utilize Entanglement Theory®?
The short answer to this question is technically yes, although the structure may not pass a judge’s “smell test”. This is the biggest obstacle to utilizing Entanglement Theory® with a DEMMLLC. Remember that a major tenet of asset protection is that if there’s not a valid reason for everything you do, besides pure asset protection, then a judge may look at an entity’s structure with suspicion and start thinking of ways to rationalize calling the entity a sham or saying it lacks economic substance. An example of a DEMMLLC that might not pass the smell test is this: John sets up an LLC where he is one member, and the other member is an irrevocable grantor living trust designed for probate avoidance, with John as grantor and beneficiary and his wife Jane as trustee. He sets himself up as the manager of the LLC, and the trust issues a promissory note to LLC, to contribute $1,000 cash each year for 30 years in exchange for a 5% membership interest. This is proportional to the total value of
Related Questions
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- Can a Disregarded Entity Multi-Member LLC (DEMMLLC) Utilize Entanglement Theory®?
