Charging Order Protection Attorneys

Owners of both limited liability companies (LLCs) and corporations enjoy the limited liability factor of their businesses. Whatever debts or liabilities are created by the business entities become the responsibility of the company, not its owners. For instance, if an LLC or corporation defaults on a business loan, the owners are not personally liable for picking up the tab.

Should you face a lawsuit for a personal injury or another such incident where a plaintiff is seeking damages, your business can be in trouble if it’s a corporation. A plaintiff can seek your stake or ownership in a corporation as compensation for such a lawsuit, which, in one fell swoop, can dismantle what you’ve worked for years to create.

An LLC, however, is different. Due to a legal mechanism known as a charging order protection, your ownership in your company may not be able to be sought as compensation if you are personally sued. That means that even if you are personally wiped clean from a particularly harsh judgment, you will have your business available to do with as you please.

For more information on this topic and how it may apply to your situation in a particular state, reach out to our charging order protection attorneys at The Presser Law Firm, P.A. Contact us online or call (561) 953-1050 for help.

You Business May Be Protected Depending Upon Your State’s Laws

With certain nuances applicable to various states, your LLC or limited partnership can be protected from a plaintiff’s compensation in a personal lawsuit judgment against you. In other states, however, a charging order could cost you your interest in your company.

Generally speaking, there are three types of charging orders; each state falls into one or the other. The states with the strongest charging orders (such as Arizona, Wyoming, and Texas) name the LLC owner’s interest in their company as the only remedy a creditor can attach to a judgment where an interest in the LLC is sought. This means a successful plaintiff will only get the LLC member’s interest in the distribution of profits but is unlikely to assume management, ownership, or get voting rights.

States with more relaxed charging orders allow creditors to foreclose on a charging order. However, getting either the foreclosure or charging order is the only way a creditor can take an LLC member’s interest in a judgment. Finally, there are other states that do not limit a creditor’s right to seek an interest in an LLC. It’s possible in this last scenario that the creditor could force the dissolution of the LLC entirely.