Thursday, July 26, 2018

Charging Orders

As has been discussed previously on this blog, multi-member LLC’s offer a strong form of asset protection since the underlying assets cannot be attached by an individual member’s personal creditors. Specifically, the sole remedy available to such a creditor would be to obtain a charging order against the member’s LLC interest and only be paid if the LLC distributes assets to that member.

A charging order is essentially the right to receive a distribution when (and if) a distribution is ever made. Thus, a creditor will only receive assets if a distribution is made to the member. The charging order does not provide the creditor access to the LLC’s underlying assets, nor does it provide any voting rights in the LLC. The ultimate purpose of the charging order (and the purpose of keeping assets in multi-member LLC’s) is to force a creditor into a reduced settlement.     

Please do not hesitate to contact Morris Law Group should you have any questions about charging orders and the protection they offer.