Single member LLC's - Posted by Bud Branstetter

Posted by Steve on February 14, 2002 at 02:42:26:

What would be the best way for a single guy to have a 2 member LLC? Possibly me and a SMLLC own the main LLC, with the SMLLC doing no business? Or maybe just holding some notes to make it functional?

Also what is your opinion on selling a small portion of the LLC (maybe 1%) to another of my entities if something happens and the sharks start to circle? That way i could stay a SMLLC unless there was trouble.

Single member LLC’s - Posted by Bud Branstetter

Posted by Bud Branstetter on February 07, 2002 at 22:23:53:

At this site it gave this
Tip: If an S corporation is to hold valuable assets, remember an LLC taxes a partnership can not own the stock of an S corporation to protect it (because of the charging order provision. This is not the case of a single member LLC, but the single member LLC does not have the charging order protection).

Is it true in other states that single member LLC do not have charging order protection?

Re: Single member LLC’s - Posted by JHyre in Ohio

Posted by JHyre in Ohio on February 10, 2002 at 08:50:32:

Most state statutes provide that LLCs in general have charging order protection, so the literal answer is yes, SMLLC has such protection. As a practical matter, I could easily see a judge nullifying such protection…mainly because the purpose of such protection is to avoid disrupting the company, particularly the interests of other investors. In a SMLLC, there are no other investors, so much of the rationale for the protection is absent. I’ve seen no cases addressing this issue, but as a practical matter, I think SMLLC’s probably provide weak charging order protection, at best.

John Hyre