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Blog Posts Tagged "operating agreements"

Creditors’ Rights Trump Ownership Restrictions in LLC Operating Agreements

A recent South Carolina Supreme Court decision affirms the supremacy of creditors’ foreclosure rights, and sounds a cautionary note for LLCs. The state’s high court said that LLCs can’t use an operating agreement to force a creditor to sell a distributional interest it obtained via judicial foreclosure. 

The ruling came in Levy v. Carolinian, LLC, a case involving an LLC that owns an oceanfront hotel. One of the members, who owned about a quarter of the LLC, found himself on the wrong end of a judgment for $2.5 million. Creditors obtained a charging order – essentially a lien – against their debtor’s distributional interest in the LLC. The creditors then foreclosed on its charging lien and purchased the member’s distributional interest at public auction. 

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Don’t Allow Your Business to Become a Victim of the Dreaded Ds

Is your closely-held business protected from the five dreaded Ds – death, disability, divorce, disaster and disagreement?

Turmoil, and even business failure, can follow if you don’t have a legal succession plan in place when any of these events occur. While this may not offer you any comfort, you are certainly not alone if you haven’t yet set up a succession plan: fewer than half of closely-held and family-owned businesses have a plan in place that covers these contingencies.

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