Protecting LLC Assets From Personal Lawsuits?? - Posted by Tony S. in FL

Posted by Bill Bronchick on October 07, 2003 at 12:35:12:

As I reported last month in my newsletter, there was a recent Colorado Bankruptcy Court decision that ruled a single member LLC owner could not prevent a creditor from seizing the LLC interest. This decision is not binding on other states or federal courts outside of its jurisdiction, but it does raise some uncertainty on the issue.

Protecting LLC Assets From Personal Lawsuits?? - Posted by Tony S. in FL

Posted by Tony S. in FL on October 05, 2003 at 09:50:14:

Are LLC’s isolated from personal lawsuits against the owners of the LLC?

For instance, lets say I have rentals in a LLC. I do something stupid in my personal life such as cause a bad traffic accident. The other party(s) sue me.

Can they go after my interest(s) in the LLC?

Thanks,
Tony

Re: Protecting LLC Assets From Personal Lawsuits?? - Posted by Jason

Posted by Jason on October 10, 2003 at 14:54:37:

You might want to consider another structure such as a corporation or family limited partnership owning your interest in the LLC to help remove you from personal liability or limit the extent of damages. Call me at 800-508-1872 x3201 if you want some ideas on how to do this effectively.

Re: Protecting LLC Assets From Personal Lawsuits?? - Posted by William Bronchick

Posted by William Bronchick on October 05, 2003 at 18:00:08:

In most states a creditor’s legal remedy is a “charging” order against an LLC interest, that is, the right only to receive an assignment of the LLC owner’s distributions. The creditor has no right to go after the LLC’s assets, nor can the creditor obtain voting rights without the express permission of the other LLC owners.

Re: Protecting LLC Assets From Personal Lawsuits?? - Posted by Rich[FL]

Posted by Rich[FL] on October 07, 2003 at 12:24:43:

Bill, I’ve been dying to ask this question on LLCs.

Is it better to have a 2-member LLC (as opposed to a 1-member LLC) to further strengthen the argument to withold “distributions” from the LLC? (i.e., avoiding the appearance of a SM LLC “voting” to withhold distributions simply to avoid paying on the charging order?) [I hope the question is clear - I’m at work right now and don’t have a lot of time to properly rephrase.]

I had this discussion recently with my CPA and he doesn’t see the distinction, if there is one. Or maybe I’m confused.

Thanks,

Rich

Re: Protecting LLC Assets From Personal Lawsuits?? - Posted by Tony S. in FL

Posted by Tony S. in FL on October 05, 2003 at 21:04:57:

Ok, I see.

So if you never take a distribution then they don’t get anything.

Thanks.
Tony