When creditors come calling, many business owners worry about their personal stake in a company. In Tennessee, the law provides an important safeguard through what is known as a charging order. For entrepreneurs, investors, and professionals with ownership interests in LLCs or partnerships, understanding charging orders is essential to protecting both your business and your livelihood.
What Is a Charging Order?
A charging order is a court order that allows a creditor to place a lien on an owner’s financial interest in a business. Rather than taking over the company or seizing assets directly, the creditor can only receive distributions—such as profits—that would otherwise have gone to the debtor. This makes the charging order a narrow but effective tool for creditors while protecting the operations of the business itself.
How Tennessee Law Treats Charging Orders
Under the Tennessee Revised Limited Liability Company Act (Tenn. Code Ann. § 48-249-509), a charging order is the exclusive remedy for creditors attempting to reach an LLC member’s interest. This means creditors cannot:
- Force the sale of the ownership interest.
- Seize company assets.
- Interfere with business management or decision-making.
For business owners, this is a powerful form of protection. It ensures that while creditors may be able to collect on judgments through distributions, they cannot dismantle or disrupt the business.
Why This Matters for Business Owners
If you are an LLC member or a partner in Tennessee, the charging order protection can be critical for preserving your investment. It allows your business to continue running smoothly, even if you or another member are facing personal financial difficulties. This protection is especially valuable for high-net-worth individuals, family-owned businesses, and closely held companies in areas like Sevierville, Gatlinburg, and Nashville.
How Champagne Law Firm Can Help
At Champagne Law Firm, with offices in Sevierville, Nashville, and Rogersville, we advise business owners on strategies to protect their interests from creditor claims. From forming LLCs with strong operating agreements to navigating disputes and creditor actions, we help ensure your business remains secure. Kelly Champagne-Deutekom’s background as both a financial advisor and an attorney adds an extra layer of insight into asset protection, business structuring, and risk management.
Taking the Next Step
Whether you are starting a business, drafting an operating agreement, or facing creditor pressure, understanding charging orders is key to safeguarding your business. With the right legal strategy, you can keep creditors at bay while ensuring your company continues to thrive.
Call Champagne Law Firm at 865-228-8080 or reach out online to schedule a consultation about asset protection, LLC formation, and business law in Tennessee. For more information on business filings, visit the Tennessee Secretary of State Business Services page.
