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Wyoming LLC subject to California laws in a lawsuit ?

Discussion in 'Business & Corporate Matters' started by Losangeles77, Aug 23, 2019.

  1. Losangeles77

    Losangeles77 Law Topic Starter New Member

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    Jurisdiction:
    California
    I live in California, I own a rental property with high equity and a residence here,

    I want to at least protect my rental property
    with inside and outside protection (outside meaning if im personally liable in an accident and get sued)

    I form a Wyoming LLc and transfer title of rental property to LLC. LLC now owns property.

    If Im personally sued for an accident like in a car, (not a tenant) , can a California court rule that
    my Wyoming LLC is not protected by Wyoming LLC laws ?

    Example , the Charging order protection of Wyoming would not stand up and California could eventually order a foreclosure on property.
     
  2. army judge

    army judge Super Moderator

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    I suggest you research what an LLC is and does, along with looking into a personal liability insurance policy sufficient to protect your burgeoning net worth and financial assets.
     
    Zigner likes this.
  3. flyingron

    flyingron Active Member

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    "Order of protection" isn't the term you want to be using. There's no way to dodge things just because you put them in another state. It will only slightly delay the foreign judgments to get them perfected in the state where the asset is. Even if you hide the asset in an LLC, the membership of the LLC is itself an asset.
     
  4. zddoodah

    zddoodah Well-Known Member

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    The best way to protect your property in the event you get sued for negligence and lose is by carrying appropriate insurance coverage.

    Are you saying you actually have done this or that you're thinking about doing it? Why on Earth would you organize the LLC in Wyoming if the sole purpose for doing so is to own real property in California and you live in California?

    I don't really understand what you're asking. If someone sues you and does not sue the LLC, then the LLC has nothing to do with anything.

    Huh?

    In the context of California enforcement of judgment law, a charging order is an order that may be made in a situation in which a partner or member of a partnership or LLC has a judgment against him/her but the judgment is not also against the partnership or LLC. In such a situation, the court may order that the judgment creditor has a lien against the judgment debtor's transferable interest in the partnership or LLC.

    I have no idea what you might mean by "the [c]harging order protection of Wyoming."
     
  5. Tax Counsel

    Tax Counsel Active Member

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    In most situations there is no benefit to a small business in forming the corporation, LLC, LLP, or whatever in a state other than a state in which the business actually operates. If you set up a Wyoming LLC but operate in California, you must register that LLC in California as a foreign LLC. So you end up paying registration fees and making reports to 2 states instead of just one.

    If you are sued in California then the California courts will apply California law to determine the outcome of the lawsuit unless there is a contract between you and the plaintiff in which you have agreed that the laws of some other state will apply instead.

    To the extent you operate in and have assets in California, it will be California law that determines what protection the LLC gives you, not Wyoming law.

    Wyoming law would govern the internal operations of the LLC.

    In short, in your dealings with others outside of the LLC it is the law of the state where those various dealings take place that will matter, not the state in which the LLC was organized.

    Now, in every state if you are a member of a LLC and have a judgment against you personally, your member interest in the LLC is something that the creditor will be able to reach one way or the other because your member interest is an asset of yours. The very best way to protect against that in auto accident or other negligence situation is by having sufficient insurance.
     

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