A recent decision by the Ohio Court of Appeals (Second District) held that the City of Springfield, Ohio was entitled to “pierce the corporate veil” of the defendant corporation in order to reach the shareholder’s assets. The court further held that transfers totaling about $900,000 to its shareholder (proceeds from the corporation’s sale of real property) were fraudulent conveyances pursuant to §1336 of the Ohio Revised Code.
This case was decided in June of 2013, but only recently published in the September 16, 2013 edition of the Ohio State Bar Association Report.
Forming a corporation, trust or other entity in and of itself does not automatically protect assets. How the entity is operated (and how and when various transfers are made) also needs detailed attention. The trial court in this case paid particular attention to the timing of the transfers in finding that they were fraudulent.
At a minimum, this new Ohio decision is another reminder that simply forming a corporation, trust or other entity is not enough for asset protection. You need to pay close attention to how that entity is operated (and how and when various asset transfers are made).