What is the Charging Order Protection in Wyoming?
Wyoming provides strong charging order protection under Wyo. Stat. § 17-29-503. A creditor's sole remedy against an LLC member's personal debt is a charging order, which entitles the creditor only to distributions the member would otherwise receive—not to LLC assets, management rights, or voting control. The member retains full operational authority.
How It Works
When a creditor obtains a judgment against an LLC member, the court may issue a charging order against that member's transferable interest. The creditor becomes entitled to receive any distributions allocated to the member. However, the creditor cannot force the LLC to make distributions, liquidate assets, or dissolve the business.
The member continues to vote on all LLC matters and retains complete management control. If the LLC makes no distributions, the creditor receives nothing—regardless of the judgment amount.
What Creditors Cannot Do
Under § 17-29-503, a charging order is the exclusive remedy for outside creditors. Creditors cannot:
- Seize LLC assets or property directly
- Obtain a judgment lien against the business
- Force the sale or foreclosure of the membership interest
- Access LLC books, records, or confidential information
- Participate in management or voting decisions
- Demand that the LLC make distributions
Why This Matters
Wyoming's charging order statute makes membership interests unattractive to judgment creditors. Most creditors will not pursue a charging order when the LLC can legally withhold distributions indefinitely. This discourages litigation and protects business continuity.
The protection applies equally to single-member and multi-member LLCs, making Wyoming a preferred jurisdiction for asset protection planning.
Operating Agreement Considerations
Wyoming does not require a written operating agreement (Wyo. Stat. § 17-29-110), but having one is strongly recommended. Your agreement should clearly define distribution policies and reinvestment practices. While the operating agreement cannot eliminate charging order protection, it can reinforce the LLC's discretion to retain earnings and limit creditor recovery.
Strengthen Your Protection
- Draft a detailed operating agreement specifying distribution schedules and reinvestment policies
- Consider a Series LLC (Wyo. Stat. § 17-29-211) to segregate assets across independent series, each with separate charging order protection
- Consult a Wyoming business attorney to ensure proper formation and compliance with all statutory requirements
Wyoming's charging order protection is among the nation's strongest, but effectiveness depends on proper LLC formation and operation.
This is general information, not legal advice.