How Wisconsin Can Collect on Unpaid Unemployment Insurance from Bankrupt or Dissolved Companies


Everyone has heard it before, “the only sure things are death and taxes.” Well, this can be true even after the death of a company or corporation. As most small business owners know, their business must pay a form of Unemployment Insurance (“UI”) to the State of Wisconsin. This Unemployment Insurance can then be used to pay benefits to its eligible unemployed workers based on their respective wages and lengths of service.

Unfortunately, business owners may not be aware that Wisconsin Statute 108.22(9) allows the State to collect UI from any individual that holds at least a 20% ownership interest of a corporation or limited liability company (“LLC”).

Wis. Stat. 108.22(9)

The controlling statute states that any 20% owner of a corporation or LLC that has control or supervision of or responsibility for making payments of contributions (taxes) that willfully fails to file such reports or make such payments can be held personally liable for the unpaid amount. The statute goes on to state that this liability survives any “dissolution, reorganization, bankruptcy, receivership, assignment for the benefit of creditors . . . or any analogous situation of the corporation or [LLC].”

This means that even if your business has declared bankruptcy, the State can pursue you, the business owner, for the unpaid contributions.

Case Law

There are four elements the State must show to determine that the individual is responsible for payment of the corporate responsibility:

  1. The individual must own at least a 20% share
  2. The individual must have control or supervision of or responsibility for making payments
  3. The individual’s decision not to make the payments must be “willful” and
  4. The state must have been unsuccessful in instituting proper collection proceedings against the business.

See Cory Wilson, Hearing No. S0600098MW, LIRC (Mar. 13, 2008).

Clearly there will not be much debate over the first and fourth elements. It should be clear that a person owns or does not own a 20% share of a business. The State can go after any 20% shareholder; it does not necessarily have to be the President of the corporation. Further, it will be clear that the State has instituted proper collection proceedings against the business and been unsuccessful in collecting.

However, the second and third elements do allow for some debate. The second element requires the state to show that the individual has supervision of or responsibility for making the contribution payments. This individual liability cannot be avoided by merely delegating away the responsibility.1 Therefore, if you are the President of the corporation and you put the Treasurer in charge of making payments, you can still be held personally liable for unpaid amounts.

The third element requires a “willful” decision not to pay the required contributions. Willfulness can be proven showing a “intentional, knowing and voluntary choice.”2 This willfulness can be demonstrated by something as simple as a decision to pay certain creditors or payroll but not the State UI.

A “willful” decision can also be one that is made with “reckless disregard.” Reckless disregard is shown when the allegedly responsible individual ought to have known that the taxes were not being paid and was in a position to find this out very easily.3 Therefore, once you receive notice from the State that these contributions are not being paid you must make every effort to pay them. A determination of reckless disregard requires a showing of clear and convincing evidence.4 However, it does not take much evidence to demonstrate that the individual was in a position to find out that the contributions were not being paid.


There are many individual protections gained by incorporating or forming an LLC. However, those protections do not extend to unpaid State contributions. If you are worried a business you hold a 20% stake or greater in has unpaid contributions or have received a notice from the State of Wisconsin regarding unpaid Unemployment Insurance, please do not hesitate to contact Gerbers Law.

  1. See, In the matter of S B R, Inc., Hearing No. S9900041MD, LIRC (Nov. 24, 1999) citing Hornsby v. Internal Revenue Service, 588 F.2d 952, 953 (5th Cir. 1979); Burroughs v. Fields, 546 F.2d 215, 217 (7th Cir. 1976).
  2. In the matter of Clark E. Olson, Hearing No. S9900256GB, LIRC (Jan. 31, 2002) citing Monday v. United States, 421 F.2d 1210 (7th Cir. 1970).
  3. See, Cory Wilson, citing U.S. v. Running, 7 F.3d 1293, 1298-99 (7th Cir. 1993).
  4. See Kuehn v. Kuehn, 11 Wis. 2d 15, 104 N.W.2d 138 (1960) see also In re Contribution Liability of Henry A. Warner, UI Dec. Hearing No. S9100679 (LIRC July 16, 1993), aff’d, Warner v. LIRC, Case No. 93-CV-3157 (Dane Cty. Cir. Ct. May 18, 1994).