Can a judgment creditor take full membership in a LLC?
Can a judgment creditor take full membership in a LLC?
Although this, of course, rarely happens. In Florida, the Supreme Court held that in the context of single member LLCs, a judgment creditor who has a charging order against a single member LLC may take full membership rights in the LLC.
Can a personal creditor sue a single member LLC?
An LLC can be set up as a single-member or multi-member LLC. In the event that a personal creditor obtains a judgment against a member for nonpayment, whether single- or multi-member, the creditor can attempt to attach the member’s interest in the LLC.
What are the rules for a single member LLC?
Like other types of LLCs, a single-member LLC gives owners certain asset and liability protections. Learn the rules in your state about SMLLCs, charging orders, and personal liability.
How does a judgment against a limited liability company work?
When a creditor obtains a judgment against a debtor, the debtor’s assets are sometimes held in membership interests in a limited liability company, which presents challenges for the creditor seeking recovery. The LLC Law provides for a charging order in such instances, which is a narrow remedy.
How is single member LLC different from other LLCs?
The analysis is different in the single member LLC context, because there are no other members whose consent would be required for the creditor to be admitted as a full member.
Can a judgment debtor levy on a Florida LLC?
The creditor cannot levy on, or force the sale of, a judgment debtor’s interest in a multi-member LLC in Florida. In Florida, an LLC is controlled by a manager who directs the LLC’s business affairs. Members invest initial capital in the LLC, and they can incur gains or losses from their proportionate share of the LLC’s financial interests.
Can a creditor demand payment from a LLC?
The creditor is therefore not entitled to the ordinary rights of an LLC member, such as the right to manage the company, to vote the membership interests or to withdraw from the LLC and demand payment. The creditor is only entitled to receive distributions that would otherwise be paid to a holder of a membership interest.