Updated
Charging order protection is an LLC statute that limits what a creditor can seize when suing a member personally. Instead of foreclosing on the member’s ownership interest or forcing a sale of LLC assets, the creditor typically receives only a charging order — a lien on distributions owed to the debtor-member. If the LLC makes no distributions, the creditor receives nothing.
Real estate investors use charging-order-protected LLCs to hold rental property and separate personal liability from portfolio assets.
How a charging order works
When a creditor wins a judgment against an LLC member (unrelated to the LLC’s business):
| Without charging order protection | With charging order protection |
|---|---|
| Creditor may seek foreclosure on membership interest | Creditor gets a lien on distributions only |
| Forced sale of LLC assets possible in some states | LLC assets generally protected from creditor’s direct reach |
| Other members affected by forced liquidation | Other members’ interests protected |
The Uniform Law Commission model LLC acts form the basis for most state charging-order statutes. Strength varies significantly by state.
Strongest states for charging order protection
| State | Key advantage | Annual cost |
|---|---|---|
| Wyoming | Exclusive remedy; no creditor foreclosure on membership interest | ~$60 annual report |
| Nevada | Strong charging-order statute; no state income tax | Higher fees + business license |
| Delaware | Mature business court; charging order as exclusive remedy | Franchise tax |
| New Mexico | Low cost; charging order protection | No annual report |
Weaker states may allow creditors to foreclose on a member’s LLC interest, effectively giving the creditor voting power and the ability to disrupt operations.
Compare: what states offer anonymous LLCs · should I hold real estate in an LLC
Wyoming as the investor standard
Wyoming LLC statutes (W.S. 17-29-503) make the charging order the exclusive remedy available to a creditor of a member — even for single-member LLCs after legislative updates. That means:
- Creditor cannot foreclose on the membership interest
- Creditor cannot force a sale of LLC-held real estate
- Creditor waits for distributions that the LLC may choose not to make
Many investors form a Wyoming holding LLC that owns state-specific property LLCs, layering charging order protection with local land-title requirements.
Single-member vs. multi-member LLCs
Historically, some states denied charging order protection to single-member LLCs (SMLLCs) — treating them like alter egos of the owner. Wyoming, Nevada, and Delaware now extend protection to SMLLCs, but other states remain ambiguous.
If you hold property in an SMLLC in a weak state, a personal creditor may pierce the veil or foreclose on your interest. Consult an asset-protection attorney before relying on LLC structure alone.
Charging order protection is not a shield against everything
Charging order protection does not protect against:
- Liability arising inside the LLC — tenant slip-and-fall, contractor injury, environmental claims against the property itself
- Fraudulent transfer claims — transferring assets to an LLC after a creditor’s claim arises
- Federal tax liens — IRS can pursue LLC assets in some circumstances
- Personal guarantees — if you personally guaranteed the DSCR loan at 5.75%–10.5% or hard money at 8.99%–13.5%, the lender can pursue you directly regardless of LLC structure
Pair charging order protection with umbrella insurance, proper entity structure per property, and non-recourse debt where available.
How investors structure real estate LLCs
Common pattern for a portfolio of rental properties:
- Wyoming holding LLC — charging order protection, no public member listing
- State property LLC (one per property or small group) — holds title, local land records
- Property management LLC — optional; handles operations and tenant-facing liability
- Financing in entity name — Jaken Finance Group closes business-purpose loans to LLCs nationwide
See asset protection for Texas investors for a state-specific example of layered structure.
Federal BOI reporting after August 2026
Charging-order statutes are state law. They do not decide the federal report. FinCEN’s BOI page, updated August 11, 2026, says U.S. companies are exempt from beneficial ownership information reporting and no longer have to file those reports. The final rule took effect August 14, 2026. Only certain foreign companies registered to do business in the United States must report. Those companies do not report U.S. persons who are beneficial owners. Older checklists that tell every domestic LLC to file a BOI report are out of date. Confirm the alert on that FinCEN page with your attorney before you rely on it.
Before you form an LLC for asset protection
- Consult an asset-protection attorney licensed in your state
- Choose a state with strong charging order statutes — Wyoming is the common baseline
- Maintain operating formalities — separate bank accounts, no commingling
- Obtain landlord and umbrella insurance on each property
- Close investment loans in the entity — pre-qualify with Jaken Finance Group
Charging order protection — state-by-state reality
| State tier | Charging order rule | Investor note |
|---|---|---|
| Wyoming / Nevada / Delaware | Strong statutory protection | Popular for holding LLCs |
| Illinois / Georgia / Florida | Standard charging order | Property LLC in state of asset |
| Single-member LLC states | Weaker in some courts | Maintain formalities |
Charging order protects membership interest — not the property itself from foreclosure if the LLC defaults on the mortgage. Finance in the entity that holds title: investment property LLC loans · should I hold in LLC · DSCR 5.75%–10.5%.
What Delaware, Nevada, and Wyoming actually say
These notes describe statute text opened for this explanation. They are not a prediction of how a judge will treat your facts. Have a lawyer in the property state read the operating agreement before you rely on it.
Delaware. 6 Del. C. § 18-703 allows a court to charge a member’s LLC interest so a judgment can be paid. The creditor receives only the distributions the debtor would have received. The charging order is a lien on that interest. Subsection (d) makes the charging order the exclusive remedy, and it bars foreclosure, whether the company has one member or more than one. Subsection (e) says the creditor has no right to take possession of company property. The Court of Chancery has jurisdiction over the charging order.
Nevada. NRS 86.401 lets a court charge the member’s interest with the unpaid judgment and interest. The creditor receives only an assignee’s rights. The statute calls this the exclusive remedy for a one-member company and for a company with more members. Foreclosure on the interest is listed as unavailable, and the court may not order another remedy against that interest.
Wyoming. W.S. 17-29-503 allows a court to enter a charging order against the transferable interest for the unpaid judgment. The company must pay the creditor any distribution that would have gone to the debtor. Subsection (g) says this is the exclusive remedy, including when the debtor is the sole member. Foreclosure on the interest is not available. A member who is not subject to the order may pay the judgment in full and succeed to the creditor’s rights, including the charging order itself. The debtor can also extinguish the order by paying the judgment and filing a certified satisfaction with the court.
Illustration: an $80,000 judgment against one member
Illustration only. The personal judgment is $80,000. The debtor is the only member of an LLC that owns one rental. In recent years the company distributed $40,000. A charging order under the three statutes above does not deed the house to the creditor. If the company distributes nothing, the creditor gets nothing from that interest for the year. If the company distributes $40,000, the order directs that sum to the creditor, and $40,000 of the judgment remains. A second $40,000 distribution the following year would cover the original judgment, before any interest a court adds. The choice to distribute is an operating decision. Fraudulent-transfer claims and alter-ego claims are outside these sections. Counsel in the state of residence and the state of the property should review both.
A personal creditor is not the mortgage lender
The charging order limits what a member’s personal creditor can reach. It does not bind the lender whose mortgage is on the property. If the LLC misses the payment, the lender forecloses on the real estate under the deed of trust. If you signed a guaranty, the lender can sue you on that guaranty even when the statute would stop a credit-card judgment. Those are different plaintiffs and different contracts.
Jaken Finance Group closes business-purpose loans in the entity that holds title, on non-owner-occupied property. Fix-and-flip and bridge loans are interest-only from 8.99 percent to 13.5 percent and can close in 7 to 10 business days on a complete file. A flip term runs 6 to 12 months, with up to 100 percent of cost on a qualified file, still capped at 75 percent of after-repair value. A bridge term runs 12 to 24 months, up to 90 percent of the purchase price. DSCR loans run from 5.75 percent to 10.5 percent and close in about 14 business days. Call (833) 264-7776 before title is ordered so the borrowing entity matches the application. The program guide is LLC investment property loans.
Records that keep the statute relevant
Courts look past a statute when the company was never run as a company. A practical file includes:
- An operating agreement signed before the deed, naming who may withhold distributions.
- A bank account that never pays personal expenses.
- Rent deposited to that account, and mortgage drafts that leave from it.
- Insurance in the LLC’s name, plus a personal umbrella that is not a substitute for the entity policy.
- A guaranty you actually read, because the charging order will not cancel it.
Wyoming’s formation statute, W.S. 17-29-201, does not require member names in the articles. Privacy of the member list is a separate topic from the charging order. Compare anonymous LLC filings when the question is what the Secretary of State publishes, and use this guide when the question is what a judgment creditor can collect.
Paying the judgment ends the order
Return to the $80,000 illustration. Delaware, Nevada, and Wyoming all describe a charging order as the creditor’s collection tool against the interest. Wyoming’s statute also lets the debtor end the order by paying the judgment and filing a certified satisfaction. It lets a member who is not charged pay the full $80,000 and take over the creditor’s rights, including the order. The statute does not set the interest that second member may charge the debtor afterward. That term belongs in a written agreement between them. Paying $80,000 to clear the order is often cheaper than a year of frozen distributions, and it is a business choice, not a requirement of the statute.
Rates, terms and conditions offered only to qualified borrowers and are subject to change at any time without notice. Closing times are in business days and commence upon satisfaction of borrower conditions. All loans are subject to full underwriting for loan approvals. Jaken Finance Group only finances non-owner occupied investment properties.
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