The Charter State Decides.

Burkhalter v. SMS Financial P, LLC, Assignee of RBC Bank (USA), No. A26A0196 (Ga. Ct. App. June 29, 2026), 2026 WL 1870939, is a harder and more useful case, precisely because none of that happened. Harry Burkhalter and his wife formed their limited liability company in 2007 — roughly two decades before the judgment that eventually reached it. There was no eve-of-claim transfer. There was no concealment. There were no badges of fraud to speak of. The couple did the one thing the planning literature relentlessly tells clients to do: they built early, on a clear day.

And the creditor still got a charging order.

The reason has nothing to do with timing and everything to do with a question most clients never think to ask: whose law actually governs the thing you own? Burkhalter is a reminder that seasoning is necessary but not sufficient — and that a structure can fail not because it was built too late, but because it was built on an assumption about choice of law that no one ever tested.

The facts are unglamorous, which is what makes them instructive.

Mr and Mrs Burkhalter lived in Florida. In 2007 they organized Burkhalter Rentals LLC — a Georgia limited liability company. As the decision recounts the record, the articles of organization recited that they were a married couple, Florida residents, owning their interests in the company as tenants by the entirety, and the operating agreement carried the same characterization.

Years later, SMS Financial P, LLC obtained a Georgia judgment against Mr Burkhalter alone, and applied to charge his interest in the company under Georgia’s LLC charging-order statute, O.C.G.A. § 14-11-504(a), which provides that on application by any judgment creditor of a member, “the court may charge the limited liability company interest of the member or such assignee with payment of the unsatisfied amount of the judgment with interest.”

Mr Burkhalter’s defense was, on its face, a good one. Under Florida law, property held by spouses as tenancy by the entireties is not reachable by a creditor of only one spouse — the entireties estate is owned by the marital unit, not by either spouse severally. Florida law is unusually hospitable here: since Beal Bank, SSB v. Almand & Associates, 780 So. 2d 45 (Fla. 2001), a presumption of entireties ownership attaches to personal property acquired by husband and wife where the unities of possession, interest, title, time, survivorship, and marriage are present, and the burden shifts to the creditor to prove by a preponderance of the evidence that no entireties estate was created. SMS held a judgment against one spouse. If Florida law applied, the interest was, in substance, out of reach.

The Georgia courts never reached that question, because they answered a prior one differently than Mr Burkhalter had assumed.

Mr Burkhalter argued that an LLC membership interest is intangible personal property, that intangibles are located where their owner is domiciled, and that he and his wife were domiciled in Florida when they acquired the interests. Florida law, therefore, should characterize the ownership.

The trial court held — and the Court of Appeals affirmed — that the nature of a membership interest is a matter of the LLC’s internal affairs, governed by the law of the state of organization. The company was organized in Georgia. Georgia law applied. Georgia’s LLC Act codifies the principle for foreign companies: “The laws of the jurisdiction under which a foreign limited liability company is organized govern its organization and internal affairs and the liability of its managers, members, and other owners.” O.C.G.A. § 14-11-701(a).

That choice was dispositive, because Georgia does not recognize tenancy by the entireties. Georgia’s co-ownership forms are tenancy in common and joint tenancy with survivorship, the latter of which must be affirmatively created by the language specified in O.C.G.A. § 44-6-190; the entireties estate is not among Georgia’s recognized co-ownership estates. With the entireties estate unavailable, the Burkhalters held as tenants in common — which means Mr Burkhalter owned a severable 50% interest, and a creditor of Mr Burkhalter alone could charge it.

Two decades of seasoning, and the protection evaporated on a conflicts question.

It is worth noting what the operating agreement did to its own draftsman. The same agreement that recited entireties ownership also specified that Georgia law would govern distributions and other provisions — a detail the court found supportive of applying Georgia law. The document meant to establish the Florida characterization contained, in its own text, the argument against it. An internally inconsistent agreement reads perfectly well for eighteen years of ordinary operation. It fails on the one day it is read adversarially, by someone looking for the sentence that helps them.

We think the decision is contestable, and it is worth saying why, because the reasoning matters more to planners than the outcome does.

The internal affairs doctrine is a rule of admirable narrowness. The Supreme Court has described it as reaching “matters peculiar to the relationships among or between the corporation and its current officers, directors, and shareholders” — the inter se relations of the enterprise, governed by one state’s law so that a company is not subject to conflicting demands about how it must be run. Edgar v. MITE Corp., 457 U.S. 624, 645 (1982) (holding that transfers of shares to third parties do not implicate internal affairs); see also CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69, 89 (1987). The Restatement draws the same line from the other side: where the rights and liabilities at issue involve a third person rather than the enterprise’s internal ordering, ordinary choice-of-law principles apply, not the law of the chartering state. Restatement (Second) of Conflict of Laws § 302 (internal affairs); id. § 301 (rights and liabilities of a corporation with respect to a third person, arising from an act of a sort that can likewise be done by an individual, are determined by the same choice-of-law principles applicable to non-corporate parties).

Whether a member’s interest is subject to a charging order, how distributions are made, who may vote, what a transferee gets — those are internal affairs, and Georgia law properly governed them here. But whether a husband and wife own that interest as an entireties estate or as tenants in common is not a question about the company at all. It is a question about the spouses. It concerns the marital property regime of two people, and it would have precisely the same answer if the asset in question were a certificate of deposit, a brokerage account, or a promissory note. The company’s governance is untouched either way: the LLC still has the same members, the same managers, the same distribution waterfall. What changes is only whose creditor may reach what.

Conflicts law has a settled rule for that question, and it is not the internal affairs rule. A spouse’s interest in a movable acquired during the marriage is determined by the local law of the state which, as to the particular issue, has the most significant relationship to the spouses and the movable — which, absent an effective choice by the couple, is ordinarily the state of their domicile when the movable was acquired; and a marital interest, once vested, is not affected by a subsequent change of domicile. Restatement (Second) of Conflict of Laws §§ 258, 259.

Florida’s own courts have applied exactly that principle to shares of a Florida corporation. In Quintana v. Ordono, 195 So. 2d 577 (Fla. 3d DCA 1967), spouses domiciled in Cuba acquired stock in a Florida company; the Third District held that the wife’s interest was determined by the law of the marital domicile at acquisition — Cuban community-property law — not by the law of the state that chartered the corporation. The charter state supplied the company; the domicile supplied the marital character of what the spouses owned. That is the mirror image of Burkhalter, and it is the ordinary rule in community-property analysis generally: the character of shares is fixed by the spouses’ domiciliary regime, not by where the certificate was printed.

So far as published authority discloses, Burkhalter is the first appellate decision to route this particular question through the internal affairs doctrine. It is worth setting out what courts elsewhere have done when asked which state’s law decides whether spouses hold a movable by the entireties — because the answer, with real consistency, is that they reach for conflicts principles about marriage and property, and never for the law of a chartering state.

Start with the case that most closely resembles the Burkhalters’ position, reversed. In Blackwell v. Lurie, 2003-NMCA-082, 134 N.M. 1, 71 P.3d 509 (N.M. Ct. App. 2003), a liquidating trustee holding a Missouri deficiency judgment against one spouse pursued a Frederic Remington sketch the couple had bought together in Missouri in 1978 and later placed on consignment with a gallery in Santa Fe. New Mexico — the forum, and the place where the asset physically sat — does not recognize tenancy by the entireties. The New Mexico Court of Appeals applied Missouri law anyway, holding that property “takes its character at the time and in the manner of its acquisition,” and that the sketch, acquired by spouses domiciled in a state that recognized the estate, remained entireties property beyond the reach of a creditor of one spouse. The character of the ownership travelled with the marriage — not with the asset, and not with the forum.

The mirror image is Farmers Exchange Bank v. Metro Contracting Services, Inc., 107 S.W.3d 381 (Mo. Ct. App. W.D. 2003). There, spouses domiciled in Kansas held a promissory note; the note arose out of a Missouri business the couple owned and operated, financed by a Missouri bank, on a guaranty the husband alone had signed. Missouri recognizes entireties in personalty; Kansas does not. Nearly every contact of the transaction pointed to Missouri. The Missouri Court of Appeals applied Kansas law — because Kansas was the marital domicile when the movable was acquired — and the entireties defense failed.

Those two decisions run in opposite directions on the facts and in the same direction on the principle, which is what makes them useful. Neither court asked where the business was organized. Both asked where the spouses were domiciled when they acquired the thing. And Farmers Exchange is the more instructive of the two for a planner, because it shows the rule is not a debtor’s rule: the same principle that would have rescued Mr Burkhalter — Florida domicile at acquisition, Florida’s entireties presumption — is what cost the Kansas couple their defense. A neutral conflicts rule is not one that always favours the family. It is one that gives the same answer whichever side is asking.

The pattern holds across the smaller authority. Practitioner surveys of the movables cases collect decisions applying the law of the state where household goods were acquired rather than the state the couple later moved to; the law of the state with the most significant contacts to a note and mortgage; and the law a couple effectively chose by opening an account under a particular state’s multiple-party account statute. See Franke Beckett LLC, “Choice of Law: Tenancy by the Entirety Across State Lines,” collecting In re Kirshner (household goods acquired in New Jersey and later moved to Florida governed by New Jersey law, by reference to the unity of time at acquisition), In re Goldstein, 66 B.R. 909 (Bankr. W.D. Pa. 1986) (note and mortgage governed by the law of the state of most significant contacts), In re McNeilly, 349 B.R. 576 (Bankr. D.R.I.) (Vermont law applied to a Vermont account held by a Rhode Island debtor), and High v. Balun, 943 F.2d 323 (1991) (New Jersey multiple-party account statute governed a certificate of deposit purchased there by a Pennsylvania couple). Those parenthetical descriptions follow the survey; the underlying opinions should be read before any of them is relied upon in filed work. The analytical vocabulary is always the same — domicile at acquisition, most significant relationship, situs, effective choice by the spouses. Even the real-property line, where courts apply an unforgiving situs rule, looks to where the land is; not to who chartered anything.

Nor is the picture uniform in the family’s favour, and it would be misleading to suggest otherwise. In National Bank of Arizona v. Moore, 2005-NMCA-122, 122 P.3d 1215 (N.M. Ct. App. 2005), the New Mexico Court of Appeals applied the law of the state in which the judgment was domesticated to the garnishment of a New Mexico account opened by an Arizona couple, with the result that a creditor reached what the couple’s own marital-property law would have shielded. Courts differ over how much weight to give the forum, the situs of the asset, and the domicile. What no court in this line does is treat the question as one belonging to a company’s charter.

A final strand shows how courts actually resolve these disputes when an LLC interest is the asset in question. In bankruptcy, the recurring issue is not which state’s entity law applies but whether the four unities are present on the face of the operating agreement. Courts read the document. Where spouses are designated as owning the interest jointly — “Tenants by Entireties 100%” — the entireties claim proceeds, as in In re Romagnoli, 631 B.R. 807, 812 (Bankr. S.D. Fla. 2021). Where the agreement establishes separate members, separate capital contributions, separate votes, and separate capital accounts that can drift apart over time, the unity of interest is destroyed and the claim fails, however the couple understood their own arrangement: In re Barton, No. 23-41234-357 (Bankr. E.D. Mo.), sustained a trustee’s objection to a § 522(b)(3)(B) entireties exemption in an LLC membership interest on exactly that ground, observing that “although the spouses collectively own all of the membership interests in the Company, they do not each own all of the membership interests, as a tenancy by the entirety would require” (compare In re Lemanski, 640 B.R. 910, 912 (Bankr. E.D. Mich. 2022), where the operating agreement specified distinct capital contributions and ownership, such that the spouses “did not own any membership interest jointly”). That is a marital-property analysis conducted on the four corners of a company document. It is not an internal-affairs analysis, and no one in those cases suggests it should be.

Nothing in the LLC statutes commands a different result. Georgia’s Act declares a limited liability company interest to be personal property of the member, with no member interest in specific company property (O.C.G.A. § 14-11-501), and the uniform acts confine their governing-law provisions to the internal affairs of the company and the liability of members and managers for company obligations — not to the marital character of a member’s own property (Uniform Limited Liability Company Act (2006) (last amended 2013) § 106). Georgia has not enacted the uniform act; the comparison is offered for the scope of the governing-law rule, which in both formulations addresses the company’s internal ordering rather than the marital character of a member’s own property.

There is a further irony. When the shoe is on the other foot, courts have been quite willing to say that the state of organization does not control. New York’s Court of Appeals treated ownership interests in twenty-three out-of-state LLCs as intangible property that travels with the debtor, attachable where the debtor is found. Hotel 71 Mezz Lender LLC v. Falor, 14 N.Y.3d 303 (2010) (applying the principle of Harris v. Balk, 198 U.S. 215 (1905), that intangibles accompany the person). Federal and state courts routinely enter charging orders against foreign LLCs on the strength of jurisdiction over the member, without jurisdiction over the entity — e.g., Vision Marketing Resources, Inc. v. McMillin Group, LLC, No. 2:10-cv-02252 (D. Kan.). Commentators in the trusts-and-estates bar have made the point plainly: a judgment creditor is a stranger to the company, and a stranger’s remedies are not an internal affair. See ACTEC Foundation, “Internal Affairs Doctrine, Asset Protection, and State of Formation for Legal Entities” (pt. 2) (remarks of George Karibjanian questioning whether a charging order implicates internal affairs at all, since it involves “a third party trying to take an interest”). A doctrine invoked to defeat the debtor in Burkhalter is regularly held inapplicable when a debtor invokes it to claim the benefit of a friendlier charter state.

None of which is a prediction. Burkhalter is now authority in Georgia, and a Georgia court applying it will reach the same result tomorrow. But it sits uneasily beside a body of decisions — in New Mexico, in Missouri, in Florida’s own Third District — that answer the same question with a different instrument. Sixteen states and the District of Columbia recognize entireties ownership of personal property; Maryland, for one, has done so for decades (Diamond v. Diamond, 298 Md. 24, 467 A.2d 510 (1983)), and its bar treats LLC interests as capable of it. Whether the courts of those states would characterize this as a marital-property question or an internal-affairs question is, on the published authority, unresolved, and turns on each state’s conflicts law; the point is that the question is genuinely open, not that a contrary result is assured.

That divergence is the planner’s real problem. When the answer depends on which appellate court hears it first, you do not have a protected asset. You have a research memorandum.

There is a comfortable way to misread this case — “Florida entireties protection doesn’t work” — and it is wrong. Entireties ownership did not fail on its merits. It was held to be off the table, because the court characterized the ownership question as one for the chartering state’s law.

The transferable lesson is this: the protection you receive is the protection a court says you have after it decides whose law applies — and that decision is made years after the drafting, by someone with no stake in your intentions. Clients think in terms of where they live. Creditors, and courts, may think in terms of where the entity lives. Those are different questions, and both are on the ballot when the charging application is filed.

Seasoning defeats the fraudulent-transfer attack. It does nothing at all against a choice-of-law attack. The two failure modes are independent, and a plan has to be built against both.

There is a further point in Burkhalter that the headline obscures. Having lost the characterization argument, Mr Burkhalter was left with whatever Georgia’s charging-order regime provides — and Georgia’s regime is, by design, comparatively creditor-friendly.

Georgia’s statute permits a court to charge a member’s interest with payment of the judgment, and it does contain a genuine protection: a judgment creditor “shall have no right under this chapter or any other state law to interfere with the management or force dissolution of a limited liability company or to seek an order of the court requiring a foreclosure sale of the limited liability company interest,” except as otherwise provided in the articles of organization or a written operating agreement. O.C.G.A. § 14-11-504. That is real, and it matters.

But the statute goes on to say something that the purpose-built jurisdictions never say. The charging order, it provides, “shall not be deemed exclusive of others which may exist, including, without limitation, the right of a judgment creditor to reach the limited liability company interest of the member by process of garnishment served on the limited liability company.” O.C.G.A. § 14-11-504(b). Georgia’s limited partnership analogue, O.C.G.A. § 14-9A-52(b), is likewise expressly non-exclusive, and the Court of Appeals has held that as an aid to enforcement of a charging order a trial court may order the charged partnership interest foreclosed by judicial sale. Nigri v. Lotz, 216 Ga. App. 204, 453 S.E.2d 780 (1995).

Not exclusive. That single clause is the difference between a wall and a speed bump. Compare the alternatives a planner actually has available:

Had the same interest sat in a Florida LLC with two genuine members, the creditor would have faced § 605.0503’s exclusive-remedy language: the charging order is a lien on the judgment debtor’s transferable interest, and § 605.0503(3) makes it the sole and exclusive remedy of a judgment creditor of a member or transferee of a multi-member Florida LLC. Whether spouses’ entireties ownership of a membership interest is respected turns, there too, on the operating agreement and on satisfaction of the unities — equal management rights, equal economic interests, and survivorship — and is fact-specific. Had it sat in a Nevis LLC, the creditor would have faced a charge that is expressly not a lien, reaches only distributions if and when a manager actually makes them, and expires on a non-renewable three-year clock (Nevis Limited Liability Company Ordinance, Cap. 7.04(N), § 60, at §§ 60(2), 60(10), 60(15)).

The Burkhalters were not choosing between protection and no protection. They were choosing between charging-order regimes — and, so far as the record suggests, they were not consciously choosing at all. The entity was Georgian because that is where the rentals were.

Nothing in Burkhalter undermines the Lighthouse themes. It adds a fourth to the familiar three.

1. Seasoned. Built years before a claim, when there is no creditor to hinder and therefore no intent to infer. The Burkhalters had this, and it is why no one accused them of a voidable transfer.
2. Irrevocable and discretionary. The settlor cannot flip a switch when trouble arrives; benefit is discretionary rather than guaranteed.
3. Independently administered. A genuine trustee, not the settlor in a different hat.
4. Deliberately sited, and consistently papered. The governing law is chosen, for its creditor-remedy rules, and every document in the file says the same thing about what is owned, by whom, and under which law.

That fourth point is where Burkhalter lives. A structure is not one decision; it is a stack of them — charter state, entity form, ownership characterization, governing-law clauses, and the trust (if any) sitting above the membership interest. A creditor’s lawyer will attack the weakest layer, and choice of law is invisible until it is attacked. If the articles say one thing about ownership and the operating agreement says another about governing law, the creditor gets to pick which sentence to read aloud.

And note where the entireties theory sits in that stack: it is a single-layer plan. It asks one unsettled question to carry the entire weight of the protection. A structure that instead sites the entity in a jurisdiction with an exclusive charging-order remedy, and places the interest beneath a seasoned irrevocable trust, does not need to win the conflicts argument at all — because the creditor’s best case still ends at a charge against distributions that an independent trustee is under no obligation to declare.

Burkhalter is not a story about a debtor who cheated. It is a story about a couple who were early, honest, and wrong about one thing — and one thing was enough.

The comfort in it, such as it is, lies in how curable the defect was. Everything that failed here failed at the drafting table, years before anyone knew there would be a judgment: the state of organization, the ownership recital, the governing-law clause, the absence of any trust layer above the interest. All of it was fixable on a clear day, at a cost measured in professional fees rather than in fifty percent of a rental company.

That is the whole discipline. Build early — and then be sure that what you built does not depend, for its protection, on a question no appellate court has yet answered in your favour. This note is general information about a published decision and its planning implications, not legal advice for any particular person or matter; outcomes turn on the specific facts, the documents, and the jurisdictions involved, and should be assessed with counsel qualified in the relevant states.