LLC charging order states became part [You Asked]

Last updated : Aug 29, 2022
Written by : Louis Hoeller
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LLC charging order states became part

What states have the strongest charging orders?

The states with the strongest charging orders (such as Arizona, Wyoming, and Texas) are those that name the LLC owner's interest in their company as the only remedy a creditor can attach to a judgement where an interest in the LLC is sought.

Is Texas A charging order state?

In Texas, a charging order is the only legal procedure that personal creditors of a Texas LLC member can use to get at a member/debtor's LLC ownership interest. A charging order directs the LLC to pay to the creditor any distributions of income or profit that would otherwise be distributed to the LLC member/debtor.

Does Arizona have charging order protection?

Arizona restricts creditors of single member LLCs to the charging order remedy. However, there is always a possibility that the law may change. Therefore, owners of single member LLC's should still exercise caution, especially if your business enters into contracts with companies located outside of Arizona.

Does Delaware LLC have charging order protection?

To many, this is astonishing that this protection also extends to LLCs with only one owner, provided it is formed in Delaware. This charging order remedy prevents even a single-member LLC owner's hostile personal creditors from attempting to control or liquidate the LLC's assets.

Which state offers the most protection for an LLC?

Best State for LLC Asset Protection Nevada, Delaware, and Wyoming are well known for having superior asset protection codified in their state laws, where a charging order is the sole remedy to pay the debts of the LLC.

Which state offers the best protection for LLC?

Wyoming LLCs also have the nation's best asset protection laws and a business-friendly tax framework, with no corporation or personal income taxes. Wyoming has the 44th highest local tax rates in the nation.

What states charge charging orders?

  • Alaska.
  • South Dakota.
  • Nevada.
  • Delaware.
  • Wyoming.

How do you enforce a charging order?

Any person who has obtained a charging order over an interest in property can apply to the court to order the sale of the property to enforce the charging order (CPR 73.10C(1)).

Does Wyoming have charging order protection?

Wyoming LLCs do provide this second type which is called charging order protection. Enjoying these benefits is not as simple as only filing Articles of Organization with the Secretary. Rather, the LLC must be funded and care taken to obey other corporate formalities, e.g. annual meetings and a proper set of books.

Does Arizona allow single member LLC?

company (“LLC”)? One or more persons can form an Arizona LLC by signing and filing Articles of Organization with the Arizona Corporation Commission. A.R.S. § 29- 3201. These persons are called “organizers.” “Person” includes individuals and entities.

Why is an LLC better in Delaware?

Delaware is often considered one of the best states to form an LLC because it has limited fees and tax obligations. In fact, many businesses choose to form an LLC in Delaware even if they don't intend on doing business in Delaware.

Does Florida have charging order protection?

Florida LLC Charging Order Protection Florida law provides that a judgment creditor cannot seize or garnish these LLC ownership interests. The judgment creditor cannot attack assets, financial accounts, or real estate owned in the name of the LLC.

What is special about a Delaware LLC?

Another benefit of a Delaware LLC is their tax flexibility. When an LLC is formed, the owners can choose whether they want the LLC to be taxed as a partnership, an S corporation, a C corporation or a sole proprietorship. Single-member LLCs are not recognized by the IRS and therefore pay no taxes at all.

Which state is best for single member LLC?

The best state for forming a single-member LLC is Nevada. Nevada is the top choice for a single-member LLC because: Privacy--there is no need to disclose the members of your LLC. No state taxes.

Which state is best for anonymous LLC?

Delaware and New Mexico are the most popular states for registering anonymous LLCs. Delaware has a streamlined court dedicated to business matters and offers personal liability protections that other states do not. Also, there is no corporate income tax requirement in Delaware.

Which state is best for holding company?

The best state for an individual to establish a holding company is Wyoming, and the best state for a Fortune 500 company is Delaware.

Can I live in California and have an LLC in another state?

As a California resident, you are free to register the LLC for your online business in any state.

Can I start an LLC in any state?

When you decide to start a limited liability company (LLC), you can choose to form your company in any state, regardless of where you are based. But in most circumstances, your home state is going to be your most-effective option.

Why is Wyoming an LLC?

Wyoming has many advantages over other states for building an LLC. It has no state income tax, filing and reporting costs are low, members' privacy is assured, and it has charging order protection laws.

What happens to a charging order after 12 years?

Does a charging order expire after 12 years? The charging order on your home is recorded on the Land Registry until you pay the debt in full. It can then be removed by applying to the Land Registry. The 12-year expiry only applies in Scotland.

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LLC charging order states became part

Comment by Gerry Sgro

right now i'm standing in my backyard in front of a giant 65-foot yacht a brand new yacht like this one costs 5.7 million dollars and today we're going to talk about how this company can protect that yacht we're talking about llc charging order protection hi i'm the business guy with asset protection planners and today we're going to talk about a charging order and what that is charging order protection offers asset protection to members of llc's and partners of limited partnerships so first i'm going to talk about what the charging order is i'm going to talk about the five best states in the country that offer charging order protection even if you are the only member of the llc then i'm going to talk about the best country in the world that offers llc charging order protection that is superior to any state in the united states or any other country and just to give you a little background i've been in the asset protection field since 1991 our company started in 1906. i believe we have over 70 000 clients in our database we have licensed attorneys on our staff and we are the largest asset protection firm nationally and i need your help because for youtube to promote this video they want to know people like you like it so if you could please click the like button below i'd really appreciate it and you can also click the subscribe button so that when more videos come out like this you'll get notified okay so let's talk about what charging order protection means so let's say you were a member of a limited liability company and let's say wyoming for example okay so you own that is you're a member of a wyoming llc then somebody sues you not your business but you're in a personal lawsuit you're rearing somebody in your car and then you're sued for way more than your liability limits on your insurance happens every day as a result you can lose everything you own except for the things that are protected from that lawsuit so we look at wyoming code section 17-29-503 charging order where it says and i quote this section provides the exclusive remedy by which a person seeking to enforce a judgment that means the person who sued you against a judgment debtor and that means you when you lose a lawsuit and have a judgment against you you are a judgment debtor including any judgment debtor who may be the sole member that means it protects your assets even if you are the only owner furthermore it says other remedies including foreclosure on the judgment debtor's limited liability interest may not be ordered by the court that's charging order protection so the person who won the lawsuit against you cannot take your company away from you and they cannot take anything inside of the company away from you they cannot take away your company whether you are the only owner or just one of the owners they cannot legally jump in and make management decisions on your behalf the most that a judgment creditor could get out of the llc would be if you were to make distributions of the profit from the llc to yourself so say you have a checking account in your wyoming llc you write a check to yourself as a distribution of the profits then theoretically the people who sued you would get that money but here's something else you are not required to make a distribution to yourself they cannot force you to make a distribution plus they cannot take your membership interest away from you and they cannot jump in and become one of the managers of the llc and again this is the case even if you're the only one who owns it and single member charging order protection holds true in only five states and that's wyoming delaware nevada south dakota and alaska in all the other states you need to have two or more members in the llc in order to enjoy charging order protection so the charging order offers asset protection for the company itself so nobody can take the company away from you or the assets held inside the llc let's say you have two hundred thousand dollars invested in a stock market portfolio you wisely hold your investments not in your own name that could be gone in a flash but you are smart and you hold your investments in an llc okay so let's say you're making 10 annually you're in a mutual fund so it's producing twenty thousand dollars per year on average in this particular year you made the twenty thousand dollars if you take it out and distribute it to yourself it would theoretically go to your opponent on the other hand if you keep it in the llc that's perfectly fine they can't force you to do anything else with it and the true beauty is this there's another booby trap with the charging order protection and that's revenue ruling 77-137 in other words a revenue ruling that occurred in 1977 and it was the 137th ruling that year it states that whoever has the right to receive the distributions of the profit from the llc that is the one who has the income rights from tax flow through entities such as an llc or limited partnership needs to pay the taxes on the profit that llc makes on that member's interest in the llc whether they receive the profit or not so in other words you as the member of the llc decide not to distribute the profits that would be paid to these other people however they still have to pay the taxes even though it remains in your company some more recent decisions have softened that blow in some cases okay now so in other states besides nevada wyoming and these other states you need to have two or more members in order to enjoy that protection if there's only one member let's say in california florida new york texas they would theoretically get the charging order and then foreclose on your interest and take the company and its assets so in other us jurisdictions besides those five states you need to have two or more members to enjoy the charging order protection okay so how long does a charging order last in the u.s 20 years a judgment lasts for 10 years and can be renewed for another 10. during that time you can get the money out in other ways instead of paying a distribution why not pay yourself a salary or pay a trusted friend or relative they can buy you the things you need such as help you with your mortgage payment or buy your groceries so there are some tricks to getting the money out of the llc without the llc's income being subject to your judgment creditor now let's kick it up a notch there's another jurisdiction that offers far superior protection and this is a place where we have established thousands of llc's in fact we have established more llc's than anyone on the planet that is the caribbean island of nevis a nevis llc is the llc that offers the best charging order protection on the globe i've been to nevis many times i know two of the last three premieres of nevis as you can see on our websites and in the 30 years i've been in this business i've done tremendous research i've probably written more asset protection articles than anybody on the planet and i've never seen any llc anywhere that offers more protection than the one offered on this island that sits off the southeast tip of florida in the caribbean sea it offers the strongest as

Thanks for your comment Gerry Sgro, have a nice day.
- Louis Hoeller, Staff Member

Comment by l2ai2n

hi Clint Kunz here with Anderson business advisors and in this video I'm going to discuss the single-member limited liability company and asset protection you know there's a lot of internet talk out there about single member LLC's not providing any protection that you do not have what is referred to as charging order protections I just met with a client the other day who sat down with me and said they talked to an attorney out of California and the attorney said well if you're creating an LLC in Washington you have to make sure that it's set up this way otherwise you will not have charging order protections now if you're not familiar with what charging order protections are well it comes down to this if you get sued as an individual and you have a limited liability company set up here okay so here's my LLC and it has a piece of property in there let's assume i generate $12,000 a year positive cash flow on this LLC i am the member of this limited liability company if a creditor over here all right let's draw our creditor in this pitchfork is horns he comes after me and he sues me and he gets a judgment against me for $100,000 well what can he take from me well anything that's in my personal name maybe my house they could put a lien on my house if they wanted my car they could take my my car there but assets held in LLC's that's a little different can they take my limited liability company from me now many people will tell you on the internet well actually not many there are people out there will tell you on the internet that single member LLC's can be taken that your creditor can walk in and say alright this LLC is now my LLC to the extent that you owe me $100,000 now that information what they're referring to there is a foreclosure action that they're gonna foreclose on your LLC and the reason why we created the LLC in the first place is that we wanted to ensure that our asset in here is protected from our liabilities and we're protected out here from our assets liability so if something happens on the inside of the box it stays on the inside of the box the other thing I tell people if it happens on the outside of the box it stays on the outside of the box so when you're told that a single-member LLC does not have charging order protect that information is somewhat accurate what I mean by somewhat accurate is that it depends on the state law not all state laws are crafted equally so you have to understand where you're creating your entity is important for example let's take California for instance if I set up this LLC this way in California and I made the 12 K and my judge tells me hey we're gonna put a charging order on your LLC and with that what he's informing me is that if I take out the $12,000 is the distribution to Clint I gotta pay to my creditor until I've paid off this full $100,000 that's what a charge earner protected entity is that if somebody puts a charging order on your interest they can't take your LLC from you if you pull the cash out you got to give it over to your creditor now if they tell you that it does not have charging order protections what they're telling you then is that if this does not happen if they don't get paid out because of course if it's my LLC and the judge tells me I got to pay any distributions over to my creditor I'm not taking distributions I'm keeping all the money in there what I'm gonna do is rather than take distributions I'm gonna take out a loan to myself right you can do that or heck I managed it why don't I just pay a management fee to myself out of my LLC none of these are distributions and that's gonna frustrate your creditor because they're not getting paid so in states such as California if that charging order does not pay out then they can foreclose on your interest they can come in and take this LLC from you and give it to your creditor they could what they do is sell it to the highest bidder and then the creditor would get paid up to $100,000 so when they say it does not offer charging order protections what they really mean is that the state law provides that a creditor can foreclose on your interest okay now whether or not a creditor can foreclose on your interest depends as I stated on state law so this multi-member stuff that you hear a lot of people talk about oh it needs to be a multi-member LLC in order to have charging order protections that's not relevant in many statutes all it comes down to is this if I had say three members inside of here and this law allows foreclosure against the members interest although new is foreclosed on this members interest not the other two members there so having multiple members isn't necessarily going to provide you more protection if the state law provides foreclosure is a remedy so when I hear people say well I have to have multiple members in my LLC in order to make sure I have these charging order protections here and a creditor can't foreclose you're fooling yourself it depends on your state law that's why you need to know what what your state statute reads let's say South Carolina South Carolina for instance specifically provides for foreclosure in their statutes so if somebody came after you they could just take your interest so when you're creating an LLC what you want to look for is you want to make sure any interest you're holding personally has charging order protections and more importantly you would like to see the statute read that the charging order is the exclusive remedy available so oftentimes you've seen me do this many times the way we accomplish that with our structures is rather than set up your LLC and in a state that may be questionable or is downright weak like California what we'll do is we'll create these structures your LLC's to hold your assets in any state where the property is located so this could be Florida South Carolina California and then we're gonna create a holding LLC down here and this is gonna be in Wyoming this will be your Wyoming LLC just like that and then you can be a single member in that LLC and it's fine because Wyoming statute reads that the charging order is the exclusive remedy available to a creditor and it doesn't matter if this is a single-member LLC or multi-member LLC so they just kind of kill that whole argument right away now if you're wondering where what is the backstory where this argument came from there was a case in Florida a number of years ago called the Olmstead decision and what an individual had created an LLC there it got a judgment against him personally from the federal government they came after him and they ended up getting the LLC and what troubled so many practitioners after the Olmstead decision was that the Florida Supreme Court basically obliterated the statute they said well it the statute reads that the charge owner is the only remedy available well in this case only doesn't mean only it's only meant to protect when there's more than one member here we only have one member in an LLC and clearly the legislature didn't mean to protect one individual now when you listened to the oral argument it was baffling to hear this Florida Supreme Court even referred t

Thanks l2ai2n your participation is very much appreciated
- Louis Hoeller

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