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Single Member LLCs Should Take Care

July 2, 2013

I just noticed this excellent article on the erosion of the charging order protection for single member LLCs. The author, attorney Lee R. Phillips, notes several instances where courts have permitted creditors of the single member of an LLC to avoid the protection of a charging order, thus giving them access to the LLCs assets in order to satisfy a judgment. As the article points out, this does not eliminate the corporate shield which protects owners of an LLC from the company’s liabilities; it only permits creditors of the owner to seize assets of an LLC to satisfy the owner’s debt. Mr. Phillips suggests that in forming an asset protection plan, folks should seriously consider the virtue of multi-member LLCs, for which this protection has not been eroded. My own take is that a person seeking asset protection should carefully consider not only the use of a multi-member LLC, but should also consult an attorney to determine if the state where the LLC is located has suffered the erosion of protection that is addressed in this article.

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