Single-Member LLCs And Charging Orders
Topic SMLLC TopicsSingleMemberLLCSMLLC
Since the sine qua non of charging order exclusivity is to protect the interest of non-debtor partners pursuant to the "pick you partnership" doctrine, the charging order remedy should not apply to a single-member LLC (SMLLC).
The ULLCA establishes a two-part procedure for dealing with SMLLCs: First, the creditor obtains a charging order lien under § 503(a); and, second, the creditor forecloses on the lien under § 503(f), which makes the creditor the new single member of the LLC, which then is presumably wound up so that its assets may be distributed to creditors.
It is suggested that this procedure is wasteful and somewhat duplicative, and that a creditor should simply be allowed to levy on the single interest in the same fashion as any general intangible. Consideration should also be given to simply allowing the creditor to levy directly upon the LLC's assets.
Note that there is an issue as to when the single member status of the entity is to be tested, considering that a wily debtor will attempt to have a strawman buy a 1% or other small interest in the LLC for value so as to destroy the single-member status. Whether the existing provisions are retained or new provisions are adopted, this issue should be addressed.
- 2021.03.30 ... Some Random Musings About Single-Member LLCs Versus Multiple-Member LLCs
- 2020.12.17 ... Louisiana Court Of Appeals Rejects Busting Of Single-Member LLC In AOK Property
- 2017.11.23 ... Charging Order Not Exclusive Remedy For SMLLC Interest In Heckert
SINGLE-MEMBER LLC OPINIONS
- AOK Property Investments, LLC v. Boudreaux, ___ So.3d ____, 2020 WL 7240057, 20-237 (La.App. 5 Cir. Dec. 9, 2020).
- Hage v. Salkin, 2012 WL 718644 (S.D.Fla., Slip Copy, 2012).
- Heckert v. Heckert, 2017 WL 5184840 (Tex.App., Nov. 9, 2017).
- Olmstead v. FTC, 44 So.3d 76 (Fla., 2010).
- Regions Bank v. Hyman, 2015 WL 1912251 (M.D.Fla., April 27, 2015).
- Saadi v. Maroun, 2018 WL 1282325 (M.D.Fla., March 13, 2018).
- ULLCA 503f Foreclosure of SMLLC Interest