A Connecticut LLC owns a commercial property in Bridgeport. The LLC has three members: XYZ Corp (60% interest), Paul (25% interest), and Sarah (15% interest). XYZ Corp files for bankruptcy. Which of the following best describes the impact on the LLC's ownership of the property?
Correct Answer
A) The LLC continues to own the property because the LLC is a separate legal entity; only XYZ Corp's membership interest in the LLC is affected
An LLC is a separate legal entity from its members under Connecticut law. The commercial property is owned by the LLC, not by XYZ Corp directly. XYZ Corp's bankruptcy affects its membership interest in the LLC (its 60% economic interest), not the LLC's real property directly. Creditors of XYZ Corp may seek to attach the membership interest, but the LLC itself and its property are insulated from XYZ Corp's individual bankruptcy unless the court pierces the corporate veil.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Tenancy by the entirety is a form of co-ownership available only to married couples that includes the right of survivorship and protection from individual creditors. Neither spouse can unilaterally sell or encumber the property.
Tenancy in common is a form of co-ownership in which two or more persons hold separate, undivided interests in property without the right of survivorship. Each owner can hold unequal shares and can independently transfer their interest.
A freehold estate conveys ownership rights, while a leasehold estate grants the right to possess and use property for a specific period without ownership.
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