An example would be personal medical bills that are in no way connected the the LLC.
Contracts / Agreements Lawyer
Yes the LLC assets would be shielded from the personal debts of its members, HOWEVER, as the membership interest in the LLC is an “asset of the personal debtor” that protection maybe short-lived.
In CT an LLC is treated as a separate legal entity (so long as certain conduct isn’t engaged in to breach that corporate identity (i.e. co-mingle funds, etc). The LLC members each have a membership interest in the LLC and are therefore entitled to distributions of the LLC’s profits. In addition, many LLC members may also be employees of their own LLC and therefore receive wages in addition to member distributions.
As a result, when an LLC member has a personal debt the creditor typically will pursue vigorously that member for payment. If personal money is not available an aggressive creditor may file suit and obtain a judgment against the individual member. Once that judgment is obtained a Connecticut creditor has a variety of post judgment collection options. The CT Judicial Branch publishes a nice summary Enforcing Money Judgments at http://www.jud.ct.gov/lawlib/Notebooks/Pathfinders/EnforcingMoneyJudgments.pdf
As it may relate to an LLC member two possible options for collection that would involve the LLC would be Wage Executions (Section 2 on see pg 7) and/or Charging Orders (see Table 5 on pg 39).
While the LLC assets would likely be shielded under either scenario, the LLC member’s wages and/or distributions would be at risk, effectively limiting the benefit the LLC member will realize from their company.
You should consult an attorney to evaluate your situation and try to negotiate a resolution to your personal medical bills, something a healthcare provider may be willing to do instead of the cost and expense of pursuing collection further.
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Yes, unless the members commingled their personal funds, or signed things for their personal obligations in the LLC's name. As long as things were kept separate, the creditors wouldn't even know that the member co-owned an LLC.
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Yes assuming that the LLC is operated as separate from its members. Things like commingly of assets would change this answer.
Hope this helps.
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Limited Liability Company (LLC) Lawyer
The answer to your question lies in the State LLC act of the State where the company was formed. In most States, the LLC Act contains language indicating that the "sole remedy" of creditor of a Member of an LLC is a "charging order."
LLCs are more like partnerships than like corporations.
It is a fundamental of partnership that you have the right to "pick your partner(s)." This means that without your consent, a new partner cannot enter the partnership. The "sole remedy" language contained in most LLC acts is seeking to protect the same principle - that is to prevent a creditor of a Member of the LLC from becoming a new Member by attaching and buying the Membership Interest. The charging order acts like a garnishment served on the LLC. If the LLC is making a distribution, the holder of the charging order, rather than the member against whom he holds a judgment, will receive the distribution. BUT the creditor will not become a member, not have a right to attach the assets of the LLC.
In some States, the rule is different in the case of a single member LLC.
You need to discuss this issue with an attorney practicing in the State where the LLC has been formed.
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