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In 2010, the Florida Supreme Court issued a ruling that eviscerated the effectiveness of the Florida single-member LLC for asset protection purposes. States such as Nevada, Alaska, and Wyoming provide express statutory language respecting the protection of single-member LLCs. Wyoming became a particular favorite because of its low cost and the fact that LLC members and managers were not required to be publicly disclosed. A recent decision by the Supreme Court of Wyoming, however, should give planners cause for concern. In the 2014 case of Greenhunter Energy, Inc. v. Western Ecosystems Technology, Inc. The Wyoming Supreme Court upheld a ruling that permitted the creditor of a corporation's wholly owned subsidiary to "pierce the corporate veil" of the subsidiary, making the parent company responsible for the debts of its subsidiary.

Veil piercing is an extraordinary legal remedy typically reserved for those cases involving fraudulent conduct. The remedy is rarely permitted unless a limited liability entity is found to be mere" alter ego" of its owner such that it would be inequitable not to make the owner responsible for the subsidiary's debts. In the Greenhunter, the Wyoming Supreme Court acknowledged that the two companies (parent and subsidiary) maintained separate bank accounts and business records. The court, however, took the unprecedented step of considering consolidated tax returns as a factor favoring the alter ego relationship and permitted the plaintiff to pierce the subsidiary (to reach the parent's assets).

The Wyoming Supreme Court's decision to confound tax treatment with legal liability is unprecedented and runs counter to proper application of LLC protections. This is a dangerous and surprising prospect from a state otherwise offering one of the most protective LLC statutes in the country. The ruling forces us to consider dropping Wyoming as an option for LLC formation.

Other factors should be considered as well.

• If stability is a concern, Delaware is a traditional choice and Nevada offers a sound alternative due to its reliance on Delaware's long-standing body of favourable corporate law.
• If privacy is a concern, Delaware and Alaska are options.
• If the entity is to be owned by a single member and charging order protection is a concern, Nevada and Alaska offer sound legal framework.
• If maximum asset protection is desired, the best options are often offshore.

And, finally, one should always consider the types of assets to be owned by the LLC. It makes a little sense, for instance, to use a Delaware LLC to house Florida real estate for assets protection. The practical reality is that any litigation involving the property is likely to occur in Florida, where a Florida court could be expected to apply Florida Law.

Entity selection is a fluid process.

The Supreme Court of a favored state can quickly throw the state's law into tailspin.

Professional planning requires constant study…