LLCs and the Illusion of Protection

[Matthew McNeil]

For many years I assumed my LLC's Operating Agreement was sufficient until I learned that a Creditor who obtains judgement can have a significant detrimental impact on the entity.

There is an abundance of comments on BP about LLCs, and people are evenly split 50-50%; either for or against the idea. If you have an LLC or plan to create one, I suggest you consider wording that includes;

No forced distributions, Non-Pro Rata distributions, No Charging Order language, Creditor cannot force the removal of a manager, No member interest can be assigned to a creditor, and Creditors have no voting rights. Ultimately, you want limitation imposed against creditors who try to force their way into the ownership of the LLC.

Without such wording, the LLC is not as protected as you might think. My OA is about 70 pages long.