What is a charging order?
Definition
A charging order is a court-issued remedy that allows a creditor of an individual LLC member to intercept distributions the LLC makes to that member, without giving the creditor direct ownership of the membership interest or the right to participate in management.
Under North Carolina law, specifically N.C. Gen. Stat. Chapter 57D (the North Carolina Limited Liability Company Act), the charging order is the exclusive remedy available to a judgment creditor seeking to satisfy a debt from an LLC member's interest.
A charging order does not transfer the debtor-member's voting rights, management authority, or any right to force a distribution from the LLC to the creditor.
Key details
Governed by: N.C. Gen. Stat. Section 57D-5-03
Remedy type: Lien on distributions only, not on the membership interest itself
Management rights: Creditor receives no voting or management rights under a charging order
Exclusivity: In North Carolina, this is the sole statutory remedy for creditors of LLC members, meaning courts generally cannot order a forced sale of the membership interest
Tax exposure: A creditor holding a charging order may be treated as an assignee and face tax liability on the member's allocable share of income, even if no distribution is made
According to N.C. Gen. Stat. Section 57D-5-03, as of 2025.
Related pages
See the full guide: Business Succession Planning in Raleigh, NC
Deep dive: Asset Protection Strategies for Business Owners in North Carolina
Related reading: Asset protection for real estate investors
