Wyoming LLC Asset Protection

Wyoming gives a member’s personal judgment creditor one remedy, a charging order on the member’s interest, and the statute names the sole member in that rule. Distributions the company decides to make are all the creditor receives. The statute bars foreclosure of the interest, an accounting for the creditor, and any route to the company’s assets.

That rule holds when a Wyoming court applies it, and no Wyoming state court has ever construed it. The one court that has applied it, a bankruptcy panel, let a trustee take the charging order and sell it. Courts disagree about whether an out-of-state owner’s interest sits in Wyoming or follows him home. A separate statute confines veil piercing to four factors and forbids counting single-member status.

The Wyoming LLC Charging Order Under Section 17-29-503

Under section 17-29-503(a), a member’s judgment creditor applies to a court, and the court may charge that member’s transferable interest with the unsatisfied amount of the judgment. The order requires the company to route to the creditor every distribution the member would otherwise receive. The creditor gets no say in the company and no right to its property. The company keeps deciding whether and when to distribute, and a creditor holding the order waits on that decision.

Subsection (g) then makes the order exclusive for every judgment debtor, naming the sole member, a dissociated member and a transferee. It bars three routes by name. A court may not order foreclosure of the interest. It may not give the creditor an order for “directions, accounts and inquiries,” the internal information the member himself could demand. And it may not let the creditor satisfy the judgment from the company’s assets.

The uniform LLC act, which Wyoming adopted, sets out foreclosure of a charged interest and its redemption in subsections (b) and (c); Wyoming left both subsections “Reserved” and added subsection (g) of its own. The section also says nothing about dissolving the company, a remedy Nevis’s LLC ordinance bars.

The rest of the section works in the member’s favor. The member ends the charging order by paying the judgment and filing the satisfaction with the court that issued it. The company itself, or a member whose own interest is not under a charging order, may pay the creditor off and take over the order. The member keeps whatever exemption the law gives him in the interest. The section sets no expiration date, so an unpaid order lasts until the judgment is satisfied.

What Courts Have Done With Wyoming’s Charging-Order Statute

No Wyoming state court has construed section 17-29-503. The Wyoming Supreme Court’s charging-order decisions concern partnerships under earlier statutes, and none reads the LLC section. The only court to apply it is a federal bankruptcy appellate panel, in Pettine v. Lofstedt (In re Pettine), BAP No. 23-013 (10th Cir. BAP 2023).

In Pettine, a Chapter 7 debtor held a small minority interest in a multi-member Wyoming LLC whose operating agreement restricted transfers. The bankruptcy court had already refused to let the trustee sell the interest free of those restrictions. The trustee then asked for a Wyoming charging order, since section 544(a)(1) of the Bankruptcy Code gives a trustee the rights of a hypothetical judicial-lien creditor. The panel held that the trustee was entitled to the order and that the court could authorize its sale.

A Wyoming charging order, the panel held, is a judicial lien as the Bankruptcy Code defines the term. Filing the bankruptcy case therefore did not shield the debtor’s right to distributions, because the trustee could take the one remedy the statute allows and sell it. The panel reserved whether an exemption claimed against the interest would change the result.

The sole-member clause has never been tested. Pettine concerned a company with several members, and no court anywhere has construed the words that name the sole member. Alaska and North Dakota cover the one-member company expressly in their own statutes, and no court has construed those clauses either. Wyoming’s rule for a one-owner company is the statute’s text, which no court has yet applied.

Among the Wyoming asset protection decisions on creditors’ rights, Pettine is the only one that applies the LLC charging-order section. It arose in bankruptcy, where the trustee holds a creditor’s powers and wanted the order rather than a way around it.

Does Wyoming Law Follow a Member Who Lives in Another State?

Whether Wyoming’s charging-order statute protects an owner who lives in another state depends on which court hears the creditor’s collection case, and on where that court says the membership interest is located. Courts have divided. A federal judge in Florida put the interest where its owner lived. Colorado’s Supreme Court put it in the state of formation, Iowa followed Colorado, and Delaware’s Court of Chancery left the question open.

The Florida decision is Wells Fargo Bank v. Barber, decided in 2015 by a federal district court (85 F. Supp. 3d 1308, 1314). Sabrina Barber lived in Florida and owned a one-member Nevis LLC, and two banks with a deficiency judgment came after her interest. The court treated a membership interest as intangible personal property that goes wherever its owner lives, so Florida law governed the banks’ remedies.

The order foreclosed nothing. It denied a motion to dismiss the foreclosure count, holding that the banks had pleaded a viable claim, with a charging order as the alternative.

Colorado’s Supreme Court took the other side in JPMorgan Chase Bank v. McClure, 2017 CO 22, ¶¶ 2, 23, 393 P.3d 955 (Colo. 2017). It held that a Colorado LLC interest owned by someone outside Colorado sits in Colorado when a creditor tries to enforce a charging order. Courts had disputed the location of a membership interest for years, the court said, and it declined to follow Barber. A charging order from some other state, the court added, does not bind a Colorado company until the creditor takes the steps that make it comply.

Iowa’s Supreme Court adopted the Colorado rule in 2019. In Wells Fargo Equipment Finance v. Retterath, 928 N.W.2d 1, it upheld a charging order against a Florida husband’s interest in an Iowa company under Iowa law. The Delaware decision, Deutsche Bank AG v. Devon Park Bioventures, L.P., C.A. No. 2017-0822-SG (Del. Ch. Oct. 31, 2023), said that Delaware had not decided where an out-of-state partner’s interest sits.

Two trial courts skipped the question. In Rockstone Capital v. Marketing Horizons, No. NNHCV065006818S, 2013 WL 4046597, at *3 (Conn. Super. Ct. July 17, 2013), a Connecticut court never asked whose law applied and charged a Connecticut debtor’s interest in a company formed elsewhere under Connecticut’s own statute. A Utah court went further, charging three judgment debtors’ interests in Delaware companies and ordering the interests sold under Utah law, and a federal court in Delaware later refused to let the debtors relitigate the point.

No court has yet decided where a non-resident’s interest in a Wyoming LLC sits. The decisions on both sides concern companies formed elsewhere, and the one decision applying Wyoming’s statute arose in bankruptcy, where the trustee was the one seeking the charging order.

Which court hears the case therefore decides what a Wyoming LLC is worth to an owner in another state. A creditor sues where the owner lives, and that state’s judge chooses between the two lines. A judge persuaded by Barber uses the home state’s own collection tools. In Florida, for example, a judge can order a one-member company’s interest sold on proof that distributions would leave the judgment unpaid for an unreasonable time, and Wyoming’s statute never enters the case.

A judge persuaded by McClure and Retterath instead treats the interest as sitting in Wyoming. That sends the creditor to a Wyoming court, where subsection (g) governs and a charging order is all the creditor gets. Courts are likelier to honor the formation state’s statute when the company’s business and property sit in that state, and the limit applies to LLC asset protection in every state. A Wyoming holding company run from a desk in Florida gives a Florida judge little reason to defer to Wyoming.

Wyoming is one of five states, with Connecticut, Delaware, Nevada and Texas, whose statutes bar foreclosure of a charged interest at any member count. Charging order protection is weaker wherever a statute stops short of that. A Florida resident who forms a Wyoming LLC instead of a Florida LLC gains nothing against a Florida creditor unless a Florida court departs from Barber, and Florida’s appellate courts have not spoken. The same is true of an out-of-state LLC of any kind owned by a Florida resident.

Wyoming’s other asset-protection statute meets the same limit. A Wyoming asset protection trust is reliable only for a settlor who lives in Wyoming, since the settlor’s home court will apply its own law to a trust one of its residents created.

Wyoming’s Statutory Veil-Piercing Test

Wyoming law confines a court that is asked to hold an LLC member liable for the company’s debts to four factors, and it forbids the court from counting the fact that the company has one owner. The rule is section 17-29-304, rewritten in 2016, and no Wyoming court has yet applied the rewritten section to a piercing claim. The Wyoming Supreme Court last set out the test in full two years before the rewrite, and the rewrite borrows that decision’s own words to name what a court may no longer weigh.

The Wyoming Supreme Court first extended veil piercing to LLCs in Kaycee Land & Livestock v. Flahive, 2002 WY 73, 46 P.3d 323 (Wyo. 2002), answering a certified question. A landowner sued an LLC with no assets over contamination of its land and sought to hold the managing member personally liable without alleging fraud. The court held that the veil of an LLC can be pierced in the same manner as a corporation’s, and that fraud is not a prerequisite. Wyoming’s LLC statute, the nation’s first, said nothing about piercing.

The court applied that rule to a one-member company in GreenHunter Energy v. Western Ecosystems Technology, 2014 WY 144, ¶¶ 52–56, 337 P.3d 454 (Wyo. 2014). A Texas corporation owned a Wyoming LLC that had hired Western for work on a wind-farm project and never paid the $45,807.94 judgment against it. The trial court pierced the LLC and held the parent liable, and the Supreme Court affirmed. It found no fraud of any kind, actual or constructive, and pierced anyway, because under Kaycee fraud was never required.

The test the court applied had two parts, and neither “misuse” nor “injustice” appears in the statute that followed. The company had to be so misused by its owner that the required separateness had ceased, and honoring the fiction of a separate company had to produce injustice or fundamental unfairness. Undercapitalization alone, the court said, is never enough.

The facts that carried the case were a chronically thin operating balance, a parent that decided which of the LLC’s creditors got paid, no employees of its own, and tax returns consolidated with the parent’s as a disregarded entity. Those were the facts a court weighed in 2014, before the amendment.

Two years later the Legislature rewrote section 17-29-304. It repealed the old subsection (b) and added (c) and (d). Under (c), a court deciding whether a member answers for the company’s liabilities “shall consider only” four factors: fraud; inadequate capitalization; a failure to observe the formalities the law requires; and intermingling so thorough that member and company cannot be told apart. No one of the four, except fraud, is enough on its own.

Subsection (d) tells the court what it may not weigh: anything intrinsic to the LLC form, “whether a single or multiple member” company. Its list names four things. They are the ability to elect pass-through or disregarded tax treatment, flexible operation “including the failure to observe any particular formality,” a member’s “exercise of ownership, influence and governance,” and the shelter the LLC form gives members’ personal assets from company obligations. That third item is the phrase GreenHunter‘s own test turned on, and the first is the tax fact the court weighed.

The two subsections narrow the older doctrine. No single factor other than fraud can pierce a Wyoming LLC; the case said so and the statute now says so. A one-owner company can still be pierced, since (c) presupposes the remedy and (d) names the single-member company outright. On the statute’s words, GreenHunter‘s result remains reachable through two of the four factors, inadequate capitalization and intermingling. But its misuse-and-injustice test appears nowhere in (c), and the tax and control facts it weighed are on (d)’s excluded list.

Neither subsection has yet been applied by a Wyoming court to a piercing question. The only Wyoming decision to discuss the amendment is Mantle v. North Star Energy & Construction, 2019 WY 29, n.24, 437 P.3d 758 (Wyo. 2019). The court declined to apply the amendment to a case already pending when it passed, affirmed a refusal to pierce under the older test, and held that an LLC’s members owe its creditors no fiduciary duty.

Two questions the statute leaves open have no answer from any court. Whether constructive fraud counts as “fraud” under subsection (c) is undecided; GreenHunter recited the constructive-fraud alternative and expressly found none. And whether the tax bar in (d) reaches a member’s actual filings and deductions, or only the ability to elect the treatment, has not been decided in either direction.

Section 17-29-304 runs in one direction, from the company’s creditor to the member. A member’s own judgment creditor who wants the company’s property meets subsection (g) of the charging-order section, which bars satisfying the judgment from the company’s assets, and no court has construed that clause either. An owner who treats the company as his own account, pays personal bills from it, and keeps no separate records invites the intermingling finding all the same, and a Wyoming judge decides piercing without a jury.

Fees, the Annual Report, and Privacy

Forming a Wyoming LLC costs $100 in state fees, the charge for filing the articles of organization. The annual license fee is $60 or two-tenths of a mill on the capital, property and assets the company reports as located in Wyoming, whichever is greater. So $60 is a floor rather than a flat charge, and a Wyoming holding company with no Wyoming property pays the floor. An amendment to the articles costs $60, and a foreign LLC’s certificate of authority $150. A company also registered in the owner’s home state pays that state’s fees.

Wyoming charges no late fee when the annual fee is missed. Under section 17-29-705, a company that fails to pay is deemed to be transacting business without authority. The secretary of state sends notice, and a company that has not paid sixty days later is deemed defunct and forfeits its articles of organization. A defunct company can be revived within two years by paying the delinquent fees, and the reinstatement relates back. The only dollar penalty in that section, $250, attaches to a company that loses its registered agent.

Wyoming’s public filings name no member and no manager. The articles state the company’s name and its registered office and agent. The annual report gives the principal office address and a certification, under penalty of perjury, of the assets the company holds in Wyoming. The registered agent must keep the managers’ names and addresses, and a contact person, at the registered office, and that file is not public.

A judgment creditor does not need that file. Post-judgment discovery compels the debtor to list every company he owns under oath, which is where an anonymous LLC stops hiding its owner. A company formed in the United States files no beneficial-ownership report with FinCEN.

The Limits of a Wyoming LLC and the Offshore Alternative

A Wyoming LLC protects an owner’s interest reliably only where a Wyoming court applies the statute, and no Wyoming court has yet done so. The one court to apply it held that a bankruptcy trustee could take the charging order and sell it. An owner in another state cannot know in advance whether his home court will send the creditor to Wyoming or apply its own remedies. And the veil rule that bears hardest on a one-owner company, though now written as a closed list, has never been applied by a Wyoming court.

Wyoming’s exemptions do not travel either. The $100,000 homestead and Wyoming’s other exemptions belong to bona fide Wyoming residents, and an owner elsewhere keeps his own state’s exemptions.

The offshore LLC is for the owner who wants the one-remedy rule applied by a foreign court. Where no trust owns the LLC, the default jurisdiction is Nevis. Under Nevis’s LLC ordinance the only remedy open to a member’s creditor is a charging order, for a one-member company as for ten. The order expires three years from entry, with no renewal. The creditor posts a bond first, in an amount the Nevis High Court fixes, and the High Court will not enforce a foreign judgment so far as it would charge the member’s interest.

A Nevis LLC costs more than a Wyoming LLC and adds foreign tax reporting. For a business that actually operates, a Wyoming company is the better choice.

Forming the company offshore does not settle which court hears the case. In Barber the company was itself a Nevis LLC with one member, and the federal court in Florida reached it because the owner lived in Florida. The same argument reaches any standalone Nevis LLC whose member lives in the United States. The structure that answers it puts the Nevis LLC under an offshore trust, so the member is a foreign trustee and the U.S. owner holds no interest a home court can call local property.