Attacking Asset Protection LLCs
Hillman & Loewenstein, Research Handbook on Alternate Business Forms, Forthcoming
18 Pages Posted: 20 Nov 2014
Date Written: November 18, 2014
Abstract
This chapter in a forthcoming book (to be published by Edward Elgar) addresses LLCs set up to protect property personally used by the LLC's owner from seizure by the owner's creditors (asset protection LLCs). The normal remedy available to creditors of owners of an LLC is a charging order commanding the company to pay to the creditor, instead of the debtor, the debtor’s share of any distributions the company makes. This does not work when the LLC is set up to hold assets personally used by a solitary owner rather than to operate a business. The chapter examines the creditor’s remedies based upon creative use of charging orders, bankruptcy law, fraudulent transfer statutes and reverse piercing. The chapter argues, contrary to existing scholarship in the area, that properly understood and aggressively applied, these remedies are sufficient to prevent abuse.
Keywords: Asset Protection, Reverse Piercing
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