Nevada Changes its Asset Protection Laws

Nevada, charging order, asset protection, llc

Cast a pebble into the ocean while in Japan and the ripples will result in a tidal wave in Hawaii. Impossible in nature but our legal system, as you well know, is not bound by nature or common sense. The Florida Supreme Court in "Olmstead" (see my past posts on this decision) is illustrative of this point because its decision sent attorneys and legislatures scrambling for high ground to protect clients and business filings. The tidal wave of reaction a result of one, albeit bad, decision by one Court in a far away state. This wave struck Nevada and the legislature responded in force by reforming Nevada’s charging order protections for LLCs and Corporations. (Keep in mind that Nevada was already at the top of its game when it comes to asset protection but I guess a little improvement can never hurt.)

On June 16, 2011, Nevada’s governor signed a new law specifically making a charging order the exclusive remedy of a judgment creditor against owners of both LLCs and Corporations in Nevada. The legislation specifically includes a single member of an LLC and a single shareholder of a corporation (previously the law required there be more than one shareholder for the protections to apply).

(a) Provides the exclusive remedy by which a judgment creditor of a member or an assignee of a member may satisfy a judgment out of the member’s interest of the judgment debtor [.] , whether the limited-liability company has one member or more than one member. No other remedy, including, without limitation, foreclosure on the member’s interest or a court order for directions, accounts and inquiries that the debtor or member might have made, is available to the judgment creditor attempting to satisfy the judgment out of the judgment debtor’s interest in the limited-liability company, and no other remedy may be ordered by a court. (You can read it here!)

In addition to the single member LLC changes, you can read that Nevada went above and beyond by adding additional language specifying that no equitable remedies can apply. (Equitable remedies are remedies that the court will sometimes use where the legal remedies are insufficient for the judge to get to the desired result, i.e. Goodbye Veil Piercing!) This new law ties the judge’s hands and protects your assets.

Nevada is hands down the leading asset protection jurisdiction, there is no reason ever to use any other state. Given that you can pick any state, it is shocking that anyone would consider establishing their asset protection under the laws of Delaware, Wyoming, New Mexico, or any other state.

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