Charging Order Protection

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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 either an LLC or corporation defaults on a business loan, the owners are not personally liable for picking up the tab.

Should you, personally, 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 judgement, 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 judgement 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 and each state falls into one or the other. The states with the strongest charging orders (such as Arizona, Wyoming, and Texas) are those 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. 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, but getting either the foreclosure or charging order are the only ways a creditor can take an LLC member’s interest in a judgement. Finally, there are other states that do not limit a creditor’s right to seek an intertest in an LLC. It’s possible in this last scenario that the creditor could force the dissolution of the LLC entirely.

States LLC Creditor Remedy LP Creditor Remedy
Alabama §10A-5A-5.03 Charging Order Exclusive §10A-9A-7.03 Charging Order Exclusive
Alaska §10.50.380 Charging Order Exclusive §32.11.340 Charging Order Exclusive
Arizona §29-655 Charging Order Exclusive §29-341 Charging Order Exclusive
Arkansas §4-32-705 Charging Order §4-47-703 Charging Order and Foreclosure
California §17705.03 Charging Order and Foreclosure §15907.03 Charging Order and Foreclosure
Colorado §7-80-703 Charging Order and Foreclosure §7-64-504 Charging Order and Foreclosure
Connecticut §34-259b Charging Order Exclusive Remedy §34-349 Charging Order and Foreclosure
Delaware §18-703 Charging Order Exclusive Remedy §17-703 Charging Order Exclusive Remedy
District of Columbia §29-805.03 Charging Order and Foreclosure §29-707.03 Charging Order and Foreclosure
Florida §605.0503 Single-Member: Charging Order and Foreclosure Multi-Member: Charging Order Exclusive Remedy §620.1703 Charging Order
Georgia §14-11-504 Charging Order and Garnishment §14-9-703 Charging Order and Garnishment
Hawaii §428-504 Charging Order and Foreclosure §425E-703 Charging Order and Foreclosure
Idaho §30-25-503 Charging Order and Foreclosure §30-24-703 Charging Order and Foreclosure
Illinois §180/30-20 Charging Order and Foreclosure §215/703 Charging Order
Indiana §IC-23-18-6-7 Charging Order §IC-23-4-1-28 Charging Order and Foreclosure
Iowa §489.503 Charging Order and Foreclosure §488.703 Charging Order and Foreclosure
Kansas §17-76-113 Charging Order Exclusive §56-1a403 Charging Order Exclusive
Kentucky §275.260 Charging Order and Foreclosure §362.2-703 Charging Order and Foreclosure
Louisiana La. R.S. 12:1331 Charging Order No Statute No Charging Order
Maine 31§1573 Charging Order Exclusive 31§1383 Charging Order and Foreclosure
Maryland §4A-607 Charging Order and Foreclosure §10-705 Charging Order
Massachusetts §XXII-156C-40 Charging Order §XV-109-41 Charging Order
Michigan §450.4507 Charging Order Exclusive §449.1703 Charging Order
Minnesota §322C.0503 Charging Order and Foreclosure §321.0703 Charging Order and Foreclosure
Mississippi §79-29-705 Charging Order Exclusive Remedy §79-14-703 Charging Order and Foreclosure
Missouri §347.119 Charging Order §359.421 Charging Order
Montana §35-8-705 Charging Order and Foreclosure §35-12-1103 Charging Order and Foreclosure
Nebraska §21-142 Charging Order and Foreclosure §67-430 Charging Order and Foreclosure
Nevada §86.401 Charging Order Exclusive §88.535 Charging Order Exclusive
New Hampshire §304-C:126 Single-Member: Charging Order and Foreclosure Multi-Member: Charging Order Exclusive Remedy §304-B:41 Charging Order
New Jersey §42:2C-43 Charging Order §42:2A-48 Charging Order
New Mexico §53-19-35 Charging Order §54-2A-703 Charging Order and Foreclosure
New York LLC L§607 Charging Order §8-A-121-703 Charging Order
North Carolina §57D-5-03 Charging Order Exclusive Remedy §59-703 Charging Order
North Dakota §10-32.1-45 Charging Order Exclusive §45-10.2-64 Charging Order Exclusive
Ohio §1705.19 Charging Order Exclusive Remedy §1782.41 Charging Order
Oklahoma §18-441-605 Charging Order and Foreclosure §54-500-703A Charging Order and Foreclosure
Oregon §63.259 Charging Order §70.295 Charging Order
Pennsylvania §8853 Charging Order and Foreclosure §8673 Charging Order and Foreclosure
Rhode Island §7-16-37 Charging Order §7-13-41 Charging Order
South Carolina §33-44-504 Charging Order and Foreclosure §33-42-1230 Charging Order
South Dakota §47-34A-504 Charging Order §48-7-703 Charging Order
Tennessee §48-218-105 Charging Order Exclusive §61-3-703 Charging Order Exclusive
Texas §3-101.112 Charging Order Exclusive Remedy §4-153.256 Charging Order Exclusive Remedy
Utah §48-3a-503 Charging Order and Foreclosure §48-2e-703 Charging Order and Foreclosure
Vermont 11 V.S.A §4074 Charging Order and Foreclosure 11 V.S.A §3463 Charging Order
Virginia §13.1-1041.1 Charging Order Exclusive Remedy §50-73.46:1 Charging Order Exclusive Remedy
Washington §25.15.256 Charging Order and Foreclosure §25.10.556 Charging Order and Foreclosure
West Virginia §31B-5-504 Charging Order and Foreclosure §47B-5-4 Charging Order and Foreclosure
Wisconsin §183.0705 Charging Order §179.63 Charging Order
Wyoming §17-29-503 Charging Order Exclusive §17-21-504 Charging Order and Foreclosure

DISCLAIMER: These codes may not be the most current version. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.

Updated as of September 28, 2018

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