THE LIMITED LIABILITY COMPANY
Why a Wyoming shelf LLC?
17-29-503. Charging order. Charging order.
(g) This section provides the exclusive remedy by which a person seeking to enforce a judgment against a judgment debtor, including any judgment debtor who may be the sole member, dissociated member or transferee, may, in the capacity of the judgment creditor, satisfy the judgment from the judgment debtor’s transferable interest or from the assets of the limited liability company. Other remedies, including foreclosure on the judgment debtor’s limited liability interest and a court order for directions, accounts and inquiries that the judgment debtor might have made are not available to the judgment creditor attempting to satisfy a judgment out of the judgment debtor’s interest in the limited liability company and may not be ordered by the court.
The Wyoming LLC
The Assets Are Made Unattractive To The Creditor
The manager of the Wyoming shelf LLC can refuse to distribute the earnings. (If the operating agreement so allows.) What is the advantage of withholding the distribution from the hostile creditor?
This means that the creditor is now liable for income taxes on those Wyoming LLC earnings, whether or not they’re distributed. The hostile creditor is now liable for taxes on earnings not yet received or for what is typically referred to as “phantom income.” This places the member in a stronger position to negotiate a favorable settlement. Hostile creditors don’t want to pay taxes on earned income that’s out of reach.