Opinion ID: 2537285
Heading Depth: 2
Heading Rank: 1

Heading: Nature of LLCs and Charging Orders

Text: The LLC is a business entity originally created to provide tax benefits akin to a partnership and limited liability akin to the corporate form. Elf Atochem North Am., Inc. v. Jaffari, 727 A.2d 286, 287 (Del.1999). In addition to eligibility for tax treatment like that afforded partnerships, LLCs are characterized by restrictions on the transfer of ownership rights that are related to the restrictions applicable in the partnership context. In particular, the transfer of management rights in an LLC generally is restricted. This particular characteristic of LLCs underlies the establishment of the LLC charging order remedy, a remedy derived from the charging order remedy created for the personal creditors of partners. See City of Arkansas City v. Anderson, 242 Kan. 875, 752 P.2d 673, 681-683 (1988) (discussing history of partnership charging order remedy). The charging order affords a judgment creditor access to a judgment debtor's rights to profits and distributions from the business entity in which the debtor has an ownership interest.