A charging order is, in essence, a lien filed against the LLC or limited partnership’s earnings. After winning a case and getting a judgment, the judgment creditor wants to get paid. He goes to court and gets a charging order, which ‘charges’ him with the right to receive distributions. When profit allocations are made by either entity to their members, a portion would be paid to the judgment creditor to pay down the judgment. Having a charging order placed against an LLC or a limited partnership does not convey voting rights, so creditors cannot take control of the entity and through that control, reach the assets. In addition, in a situation where the entity is profitable but management decides that the profit needs to be re-invested into the entity or to pay an owner for services rendered, no distributions of profit will be made at all, frustrating a creditor. Holding real property in either of these entities can be a great deterrent against nuisance litigation and claims.
About The Author
Garrett Sutton is a corporate attorney, asset protection expert and best selling author of 10 books. He has sold more than 850,000 books to guide entrepreneurs and investors. For more than 30 years, Garrett Sutton has run his practice assisting others in protecting assets and maximizing financial goals. The companies he founded, Corporate Direct and Sutton Law Center, have helped more than 10,000 clients protect assets and incorporate businesses. Garrett is a member of the elite group of “Rich Dad Advisors” for bestselling author Robert Kiyosaki.