Medical Practice Asset Protection – Waving the Magical Wand vs. Designing Strong Obstacles Part II

Strangling The LLC’s Sole Managing Member

 So every doctor, lawyer, and other professional with two diplomas to rub together knows the LLC (Limited Liability Company) can offer some form of protection; however, not every professional knows that many courts feel very comfortable with financially strangling the sole managing member of a single member LLC. Most lawyers will try to push LLC’s by simply stating that the entity will limit your enemy to a charging order. (A charging order is a glorified piece of paper that entitles your enemy the right to receive income upon any LLC distribution.) Nevertheless, your enemy’s charging order or paper sword can work to your advantage, for if no distribution takes place, your enemy still has to pay taxes on phantom income. Which is to say, your enemy must pay taxes on the income he does not receive. It’s a beautiful thing; however, what the uninformed advisor will not disclose to you is that many courts operate under the rationale that the charging order is for the protection of the other members in a multi-member LLC. Consequently, if there is only one member, there is no need for limiting recovery to a mere charging order. Some courts will allow for the creditor or predator to directly go after all the LLC’s assets in addition to other forms of recovery.

The LLC has other asset protection limitations. For instance, the LLC designation will not shield your personal assets from medical malpractice claims. Nevertheless, the experienced asset protection lawyer can help you avoid the judge’s noose in a variety of ways and give you the power to maintain maximum control over your medical practice.

 

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