Vermont Supreme Court Rules In Case Regarding Limited Liability Company
Last Friday, the Vermont Supreme Court ruled in the case of In re Bourbeau Custom Homes, Inc. that single-member limited liability companies (LLCs) are not “individuals” within the meaning of the law that requires employers to contribute to the state unemployment fund on wages paid to them. In that case (and in other employer situations), the Department of Labor had repeatedly taken the position that single-member LLCs, in other words those with only one owner, were employees rather than separate business entities from the employer. The Supreme Court made it quite clear that the unemployment compensation statue uses the word “individual” and that LLCs are not individuals. One of the reasons cited is that the LLC statute repeatedly expresses that an LLC is a distinct legal entity from an individual and that it makes no distinction between a single-member LLC and a multiple-member LLC so there is no reason to treat them differently under unemployment compensation fund payments.
The practical result of this case is that employers now have clarity that they need not treat owners of an LLC (whether single or multiple-member) as employees. When contracting with an LLC, those LLCs will be treated as independent contractors.
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