As I have appointed out in an earlier post, some states (Texas and Idaho, for two) have as an element for piercing the veil of limited liability the nonsensical notation of insolvency at the time of the event giving rise to the cause of action. South Carolina is another state in this column. See Ashley II of Charleston, LLC v. PCS Nitrogen, Inc., 2008 US Dist. LEXIS 47262 (June 13, 2008).
The problem, of course, is that this seems to imply that members have a continuing duty to maintain the capitalization of an LLC. This is contrary to the statutory concept of limited liability as well as the provisions of most LLC operating agreements.
Unfortunately, Iowa may be one of these states since the Supreme Court has been less than clear in articulating its position.
-Marc Ward
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