Wyoming Charging Order Protection for Single and Multi-Member LLCs

What a charging order is

A charging order is a court order against a member's transferable interest in an LLC. In Wyoming, a judgment creditor of a member or transferee can apply for one, and the order requires the LLC to pay that creditor any distribution that would otherwise be paid to the judgment debtor (W.S. 17-29-503(a)).

The creditor does not become a member, does not get a vote and cannot force the LLC to make distributions. It collects only what the company actually distributes to that member, until the judgment is paid.

Source: wyoleg.gov

Why Wyoming's version is strong

Subsection (g) is the key. It says the charging order is the exclusive remedy by which a judgment creditor may satisfy the judgment from the debtor's transferable interest or from the LLC's assets, and it expressly includes a judgment debtor who is the sole member, a dissociated member or a transferee.

The same subsection lists remedies that are not available: foreclosure on the judgment debtor's LLC interest and a court order for directions, accounts and inquiries. It also says the court may not order them. For an owner of a single-member LLC, that language is the point.

Source: wyoleg.gov

How a charging order ends

The member can end the order by paying the judgment and filing a certified copy of the satisfaction with the court that issued it (W.S. 17-29-503(d)). The LLC, or members whose interests are not charged, may pay the creditor the full amount due and take over the creditor's rights, including the charging order itself (W.S. 17-29-503(e)). And the statute keeps any exemption laws that already apply to the member's interest (W.S. 17-29-503(f)).

Source: wyoleg.gov

Charging orders and the liability shield are different

Charging order protection is about outside debts of the member. The liability shield is about debts of the LLC. Under W.S. 17-29-304(a), the LLC's debts are solely its own and do not become a member's debts just because the person is a member or manager.

A court can still impose liability on a member, but only by looking at four factors: fraud, inadequate capitalization, failure to observe company formalities required by law, and intermingling of assets and finances so that there is no distinction between company and member. No single factor except fraud is enough (W.S. 17-29-304(c)). The court may not count things intrinsic to an LLC, such as being a disregarded entity for tax or using flexible management (W.S. 17-29-304(d)).

Source: wyoleg.gov

Habits that keep the protection meaningful

Form the LLC before a claim arises. Put real money in. Keep a separate bank account. Write an operating agreement that says how and when distributions are made. Sign contracts as the LLC. Keep the registered agent and the annual report current, because a defunct company invites arguments you do not want to have.

None of this is legal advice, and a court in another state may apply its own law to an LLC doing business there. If you already face a claim, speak with a Wyoming attorney before moving assets.

Source: wyoleg.gov