Mechanics of charging order
- Member has a personal debt or judgment against them
- Creditor obtains a court order (charging order) against the member's LLC interest
- The order directs the LLC to pay any distributions due to the member directly to the creditor
- The LLC is NOT required to distribute; it can retain earnings indefinitely
- Creditor waits for voluntary distributions to capture any value
- Creditor cannot vote the interest, cannot force sale, cannot foreclose, cannot become a member
Wyoming-specific strength: single-member protection
Florida's 2010 Olmstead decision (Olmstead v. FTC) eroded single-member LLC charging-order protection by allowing the creditor to step into the member's shoes. Many states have not specifically addressed this. Wyoming Statute 17-29-503 explicitly states the charging order is the EXCLUSIVE remedy regardless of whether the LLC is single-member or multi-member. Wyoming caselaw has consistently upheld this for single-member LLCs.
Limitations
- Does not protect against federal government claims (IRS levy, FBI seizure)
- Does not protect against intentional fraud (alter ego doctrine can pierce)
- Operating agreement must support the protection (charging-order language)
- Corporate formalities must be maintained (separate bank, documented decisions)
- Does not protect from criminal forfeiture