As a Michigan Business Attorney and Estate Planning Attorney I have worked with numerous business owners and individuals to help protect their business and/or their family assets.  In many cases that protection involves forming a Michigan Limited Liability Company (an LLC).  One of the main reasons for forming LLCs is right there in their name . . . limited liability.

Many Michigan business owners desire to limit their personal liability for their business activities.  The idea being, if the business is liable for some damage to a person, business or property, the business owner does not want his or her personal assets (home, financial accounts, cars, etc.) at risk for the business liability.  Simply forming the LLC is not enough, but it is a good first step.  I will discuss additional liability limiting steps in a future post.

It’s a fact of life for many businesses and business owners . . . the dreaded lawsuit.  And what happens if you lose?  Well, you become a “judgment debtor,” meaning you are a debtor to the individual(s) or business(es) that won the lawsuit against your business.  And they have all sorts of “remedies” – actions they can take to collect on the court judgment amount.  One of those is commonly referred to as a charging order.

A charging order is a court-authorized right granted to a judgment creditor to attach distributions made from a business entity (such as a LLC) to a debtor who is a Member in the entity.  In a way, it is similar to garnishment of wages or income.  It does not give the creditor ownership or management rights in the LLC.

Remember that a charging order was just one of the “remedies” available to a judgment creditor?  Well, many business owners and individuals who want to protect their assets would like it to be the only remedy.  Can you guess why?  Let me know what you think by commenting on this post.  I will let you in on the reason in my next post and uncover the Michigan law relating to the “charging order only” remedy.

Michael Lichterman is a relationship-based business attorney who leverages his business, marketing and legal knowledge to help business owners and entrepreneurs create a Foundation for Business Success™.  This goes beyond merely drafting a set of documents – it’s about  proactively preparing the business and the business owner for continued growth while remembering the “human side” of running a business.  He best serves small business owners (less than 50 employees) and entrepreneurs.  He takes the “counselor” part of attorney and counselor at law very seriously, and enjoys creating life long relationships with his clients  and their businesses – many of which have become great friends and trusted confidants.