Nevada LLC Asset Protection

A Nevada LLC limits a member’s personal judgment creditor to one remedy, a charging order against the member’s interest, and Nevada’s statute applies that limit to every LLC, one member or many. The creditor collects only the distributions the company actually makes. A court may not order the interest foreclosed, may not order an accounting for the creditor, and may not grant any other remedy against the interest.

That protection is reliable when the creditor must collect through a Nevada court. For an owner who lives elsewhere, courts have split on whether the interest sits in Nevada or travels home with him, and a home-state judge may apply the home state’s remedies instead. A separate statute, NRS 86.376, makes a member personally liable for the company’s debts as its alter ego, on a three-part test the judge decides.

The Nevada LLC Charging Order Under NRS 86.401

NRS 86.401 lets a member’s judgment creditor apply to a court for an order charging the member’s interest with the unpaid judgment and the interest on it. Once the interest is charged, the creditor holds only the rights of an assignee. The creditor receives the member’s share of profits, losses and distributions as the company pays them. The creditor gets no vote, no management role and no claim on the company’s property. The section has been on the books since 1991 and was last amended in 2011.

Subsection 2(a) makes that order the exclusive remedy against a member’s interest, whether the company has one member or ten. It then names two remedies a court may not grant. The first is foreclosure of the interest. The second is an order for the “directions, accounts and inquiries” the member himself could have demanded from the company. The subsection closes by barring any other remedy a court could order against the interest.

The section says nothing about judicial dissolution of the company. Its bar covers the two remedies it names and anything else a court would otherwise order against the member’s interest.

Two things survive the charging order. The section preserves any exemption the member could claim in the interest. It also leaves standing a written agreement between the member and a creditor, so long as that agreement does not conflict with the articles of organization or the operating agreement. A lender who took a written pledge of the interest keeps whatever remedies that agreement gives him.

What Nevada’s Supreme Court Has Done With the Statute

The Nevada Supreme Court read the charging-order section in Weddell v. H2O, Inc., 271 P.3d 743 (Nev. 2012). A creditor holding a judgment of more than $6 million had charged Rolland Weddell’s interests in several companies. The trial court then treated the order as stripping Weddell of his management rights along with his distributions.

The Supreme Court reversed that part of the judgment. A charging order under NRS 86.401 makes the creditor an assignee of the interest, so the creditor receives the member’s economic share as the company distributes it. The member keeps every other right he held the day before, management included, and the creditor takes no interest in the company’s assets. The court grounded the result in a member’s right to choose the people he is in business with.

The decision has two limits. The court construed the section as it read before the 2011 amendment, so the exclusive-remedy rule and its one-member language come from the statute rather than from this decision. The court also held that the charging order triggered the involuntary-transfer clause in the company’s operating agreement, and it sent the case back to decide whether the other member had properly bought Weddell out under it. So the other members can buy a charged member out under a Nevada operating agreement, even though the charging order itself cannot take his interest.

A 2023 decision, Tahican, LLC v. Eighth Judicial District Court, 523 P.3d 550 (Nev. 2023), disavowed a different part of Weddell, about when a party may record a notice that real property is in dispute. The charging-order holding was untouched. No later Nevada Supreme Court decision has tested the one-member language against a creditor who asked to foreclose a sole member’s interest. A Nevada court applying the section today starts from the 2011 text and from Weddell‘s reading of what an assignee receives.

Nevada bars a creditor from foreclosing a charging order on an LLC interest or closely held corporate stock, and the shareholder’s creditor, like the member’s, takes only the economic interest. A creditor who wants to go past the charging order by alter ego must bring a separate action, the Nevada Supreme Court concluded in an unpublished 2019 order that federal courts follow.

Does Nevada’s Charging-Order Statute Follow a Non-Resident Home?

Nevada’s charging-order statute follows a non-resident member home only if the court hearing the collection case places the membership interest in Nevada, and courts have split on where that interest sits. The question has been decided differently in Florida, Colorado and Iowa, and left open in Delaware.

A federal court in Florida placed the interest with its owner. In Wells Fargo Bank, N.A. v. Barber a Florida resident was the sole member of a Nevis LLC, and the court treated her membership interest as intangible personal property that travels with its owner, so Florida law governed the creditors’ remedies. The decision, 85 F. Supp. 3d 1308 (M.D. Fla. 2015), came at the motion-to-dismiss stage. The court decided only that the complaint stated a claim for foreclosure of the interest or, in the alternative, a charging order. It ordered no foreclosure.

Colorado’s Supreme Court disagreed two years later in JPMorgan Chase Bank, N.A. v. McClure, 393 P.3d 955 (Colo. 2017). For charging-order enforcement, it held, a non-resident’s interest in a Colorado LLC is located in Colorado. The court described where a membership interest sits as a question courts had long disputed, and it declined to follow Barber. It added that a charging order from another state directed at a Colorado company has no effect until the creditor takes steps to bind the company.

Iowa’s Supreme Court adopted Colorado’s rule in Wells Fargo Equipment Finance, Inc. v. Retterath, 928 N.W.2d 1 (Iowa 2019). A Florida couple owned an interest in an Iowa company, the creditor took its Florida judgments to Iowa, and the Iowa court charged the husband’s interest under Iowa law. The couple’s tenancy-by-the-entireties argument failed because Iowa does not recognize that form of ownership.

Delaware’s Court of Chancery noted in Deutsche Bank AG v. Devon Park Bioventures (Del. Ch. 2023) that Delaware’s courts had not decided where the interest of an out-of-state partner sits. A Connecticut trial court in Rockstone Capital, LLC v. Marketing Horizons, Ltd., 2013 WL 4046597 (Conn. Super. Ct. July 17, 2013), charged a Connecticut debtor’s interests in out-of-state LLCs under Connecticut’s own statute without asking whose law applied.

Which court hears the case decides the outcome for a Nevada LLC owned from another state. A creditor who sues where the owner lives asks that state’s judge which law reaches the interest. A judge who follows Barber applies the home state’s collection remedies.

Florida’s charging-order statute, for example, lets a judge order a sole member’s interest sold once the creditor shows that distributions would not pay off the judgment in a reasonable time. Under Barber the Nevada statute never enters that case. A judge who follows McClure and Retterath places the interest in Nevada. That sends the creditor to a Nevada court, where NRS 86.401 governs and a charging order is all that court may grant.

Courts are likeliest to honor a formation state’s statute where the company’s operations and assets actually sit in that state. The same is true of LLC asset protection wherever the company is formed. A Nevada holding company run entirely from another state gives a home-state judge little reason to apply Nevada law.

Nevada is one of a handful of states whose LLC statutes both make the charging order exclusive and bar foreclosure, a line that separates them from the states that let a creditor foreclose. A Florida resident weighing a Nevada LLC against a Florida LLC meets the same split from the Florida side, where the federal courts that have reached the question applied Florida law.

Nevada’s other asset-protection statute has the same non-resident problem. The Nevada asset protection trust under chapter 166 protects reliably only a settlor who lives in Nevada, because the settlor’s home-state court applies its own law to a trust its own resident created. A Nevada resident starts from a different place: Nevada exempts a declared homestead, retirement accounts to $1,000,000 and life insurance without a cap, and those exemptions sit beside the chapter 166 trust.

Nevada’s Alter-Ego Test for LLCs

NRS 86.376, enacted in 2019, makes no one but the company liable for the company’s debts, except where a statute or an agreement says otherwise or where a person acts as the company’s alter ego. The term has three parts. The person must influence and govern the company. The two must share such a unity of interest and ownership that they cannot be separated. And treating the company as a separate entity must sanction fraud or promote manifest injustice. The statute assigns the question to the judge as a matter of law.

The Nevada Supreme Court had extended the doctrine to LLCs before the statute existed. In Gardner v. Eighth Judicial District Court, 405 P.3d 651 (Nev. 2017), parents suing over a child’s near-drowning at a water park sought to reach the managers of the LLC that ran it. The court held that the corporate alter-ego doctrine applies to LLCs, and that the LLC act’s liability shield never protected a member or manager from liability for his own negligence.

The court read the new statute for the first time in Ene v. Graham, 546 P.3d 1232 (Nev. 2024). A visitor injured on property owned by a single-member LLC obtained a finding that the sole member was the company’s alter ego. The evidence was that he used the property himself without paying the company, insured it in his own name and guaranteed its mortgage. The Supreme Court reversed.

The analysis under NRS 86.376 is the same one Nevada applies to corporations under NRS 78.747, and the trial court must make findings on each element. A one-person company tends structurally to satisfy the first element, but the court added that ownership and management by one person is not enough to pierce without further findings. The second element requires findings on corporate formalities, records, commingled funds or prejudice to creditors, and the third requires a link between the abuse and the injury. Personal use of a company’s asset, standing alone, satisfied neither.

Both decisions ran in the usual direction, with the company’s creditor reaching the member. A Nevada LLC owner has to think about the reverse, his own creditor reaching the company’s property. In LFC Marketing Group, Inc. v. Loomis, 8 P.3d 841 (Nev. 2000), the Nevada Supreme Court let a $25,000 judgment creditor collect from a corporation’s escrowed commissions on the same three elements. The debtor ran the company as his own even though his brother held every share.

The court called reverse piercing appropriate in limited instances and said the interests of innocent shareholders and creditors have to be weighed. The Nevada Supreme Court has not decided whether a member’s creditor can reach a Nevada LLC’s property the same way, against a statute that lets a court order no other remedy against the interest.

Disclosure and Fees

Nevada’s public filings name the people who run a Nevada LLC. The articles of organization list each initial manager or, for a member-managed company, each initial member. The initial list and every annual list name each manager or managing member with an address. Each list carries a declaration under penalty of perjury that no one was named with the fraudulent intent of concealing who actually exercises that authority. A Nevada company stays anonymous only when an entity or a nominee is its listed manager, the added structure an anonymous LLC in Nevada requires.

Forming a Nevada LLC costs $425 in state fees: $75 for the articles, $150 for the initial list and $200 for the state business license. Keeping the company in good standing costs $350 a year, the $150 annual list plus the $200 license renewal. A company that also registers where its owner lives pays that state’s fees on top.

The Limits of a Nevada LLC and the Offshore Alternative

A Nevada LLC protects an owner’s interest reliably when the creditor must collect through a Nevada court. On paper the statute is as strong as any state’s, with one remedy for every company and no foreclosure. For an owner in another state the protection depends on where the collecting court places the interest, and no charging-order statute anywhere stops a court from piercing a company its owner treated as his own.

An owner who wants that one-remedy rule enforced by a court outside the United States forms the company offshore. For a standalone LLC that no trust owns, the default jurisdiction is Nevis. Nevis’s LLC ordinance allows a member’s creditor only a charging order, single-member and multi-member companies alike, and that order expires after three years with no renewal. A creditor must first post a bond in an amount the Nevis High Court sets. A foreign judgment is not enforced in Nevis to the extent it purports to charge a member’s interest.

The question of which court hears the case does not go away offshore. The company in Barber was a single-member Nevis LLC, and the Florida court reached it by placing the interest with its Florida owner. Any standalone offshore LLC owned by a U.S. resident faces the same argument. Putting the LLC under an offshore trust answers it, because the membership then belongs to a foreign trustee instead of to the U.S. owner.