Reached, but Not Collected.

The error springs from a single confusion that has dogged this area for a generation: the difference between a creditor obtaining a charging order and a creditor reaching into the company to get paid. Those are not the same thing, and Universal Life Insurance Co. v. Lindberg, No. COA25-6 (N.C. Ct. App. May 20, 2026), proves it.

The judgment creditor sought a charging order against Lindberg’s economic interest in Global Growth Holdings, LLC — a Delaware company. Lindberg argued that the North Carolina LLC Act does not authorize a charging order against a foreign company at all, and that the court lacked in remjurisdiction over the Delaware entity. The Court of Appeals rejected both arguments, and the reasoning is purely textual. The remedy reaches an “economic interest,” defined as the owner’s interest in “a limited liability company” (§ 57D-1-03(10)); “limited liability company” is in turn defined as “an LLC or foreign LLC” (§ 57D-1-03(17)); and a “foreign LLC” expressly includes an entity organized under the law of “a state other than this State” (§ 57D-1-03(13)). That language captures Delaware.

So North Carolina’s statute, by its own terms, already reaches foreign companies — not because the court “applied North Carolina law to a Delaware company,” as the coverage had it, but because the legislature wrote the word foreign into the very definition the remedy depends on. And the court was emphatic about the limits of what it had authorized.

Because the order operates only on Lindberg’s own intangible personal property — his economic interest — the court needed nothing more than personal jurisdiction over Lindberg, which his general appearance supplied. It needed no in rem or quasi-in remjurisdiction over the Delaware company, and it acquired no power over that company’s governance, its managers, or its assets. The internal affairs of the Delaware LLC were never touched, and they remain governed by Delaware law.

The press framing — that North Carolina “applied its own LLC Act against a Delaware LLC” — invites the wrong inference, that the forum overrode the company’s home law. It did nothing of the kind. It applied a remedy that runs against a resident debtor’s personal property, and stopped at the company’s door. In plain terms: the creditor won the order and won nothing it could spend. It holds a lien on distributions the company is under no obligation to make.

That is the entire point. A charging order is, by design — drawn from partnership law to spare the other members a stranger forced upon them — a lien on distributions and nothing else. The creditor does not become a member, acquires no voting or management rights, cannot inspect the books, cannot compel a distribution, and cannot reach the company’s assets. Where the debtor or an aligned manager controls distribution discretion, the creditor may wait years and collect nothing. The protection was never a promise that no creditor could ever obtain an order; it is what the order cannot do once obtained.

One claim that recurs in this area should be retired. Commentators often assert that the creditor holdinga charging order is saddled with “phantom” tax on the company’s undistributed income. The better view is that this is doubtful. The income remains taxable to the member whose interest is charged; a lien on distributions does not convert the creditor into the taxpayer, and the Service would look to the member in any event. A structure that leans on a phantom-income theory to make the creditor’s seat uncomfortable is leaning on an argument that likely does not hold.

A necessary caveat keeps the point from being misread. That a charging order cannot compel a distribution does not license the member to divert one. The protection lies in the company making no distribution — not in its making distributions to, or for the benefit of, the member while stepping around the creditor’s lien. A recent decision marks the line in stark terms.

In Radiance Capital Receivables Twelve LLC v. Campbell(Bankr. S.D.N.Y. 2026), a creditor held charging orders against a debtor’s interests in numerous companies, each directing them to remit the distributions otherwise payable to him. The companies paid the creditor nothing; instead they made “dozens of payments … directly to the Debtor or for the Debtor’s benefit,” in one instance funding his living expenses through an entity he used “as a personal checking account.” When the creditor moved for sanctions and the debtor sought refuge in bankruptcy, the court held the sanctions for those willful violations nondischargeable as a debt for “willful and malicious injury.” Bankruptcy was no escape hatch.

The lesson completes the picture. A charging order leaves three postures open, not two. The company may make no distributions, and the creditor waits and collects nothing — lawful, and the whole of the protection. It may pay the creditor — also lawful. Or it may route value to, or for the benefit of, the member behind the order — and that is contempt, and in bankruptcy a debt that does not discharge. The weakness of the remedy is not a license; it is an invitation to patience — which is precisely what a properly organized structure can afford.

If a charging order is available everywhere, what does organizing in one state rather than another actually buy? It governs the questions the creditor asks afterthe order — questions answered by the company’s own organizing law under the internal affairs doctrine, not by the forum that issued the order. Two of them decide whether the lien is a nuisance or a kill-shot: whether the charging order is the exclusive remedy or the creditor may foreclose and sell the interest outright, and whether that protection survives when there is only one member.

• Wyoming, Nevada, Delaware, Texas. In each, the charging order is the exclusive remedy by statute, foreclosure on the interest is barred, and the protection now reaches the single-member company, not merely the multi-member one. See Wyo. Stat. § 17-29-503(g); Nev. Rev. Stat. § 86.401(2)(a); 6 Del. C. § 18-703(d); Tex. Bus. Orgs. Code § 101.112 (single-member protection confirmed by S.B. 2314, effective 2023).
• Florida — the trap. After Olmstead v. FTC, 44 So.3d 76 (Fla. 2010), the charging order is the exclusive remedy only for multi-member companies; § 605.0503 preserves a foreclosure sale against the interest of a sole member. A resident who organizes a single-member company at home has opted into the weakest rule available.
• Nevis — further still. A Nevis charging order is not even a lien, expires after three years, and cannot be renewed; the creditor receives distributions only as and when the company makes them.

That is the real lesson of Lindberg: the forum can hand a creditor a charging order, but the company’s own law sets the ceiling on what that order can ever become. Choose the ceiling deliberately, and the creditor is left holding a lien on distributions that will not come. Choose carelessly — or default into a single-member home-state company — and the creditor may foreclose and take the interest outright.

Here the firm writes not as a commentator but from authorship. Lighthouse Trust assembled and led the committee that drafted the 2015 amendments to the Nevis Limited Liability Company Ordinance — now consolidated as Cap. 7.04(N) — from which these protections derive. Two of them answer the creditor’s predicament directly.

First, the tax question. Recall that the diverted payments in Campbellwere caught precisely because they were made “for the benefit of” the member. Nevis permits the company to do lawfully, by statute, what that debtor attempted by defiance: it may pay a member’s personal income tax directly to the taxing authority, and the Ordinance provides that the payment is not a distribution at all.

Second, and more fundamentally, the Ordinance declines even to call a Nevis charging order a lien. Where North Carolina’s Act provides that the order “constitutes a lien” on the debtor’s interest, § 60(10) provides the opposite: a charging order “shall not be construed to constitute a lien on a member’s interest.” The creditor is left with a bare, non-renewable right that lapses in three years, against a company that may lawfully route the member’s taxes around it entirely. That is about as close to a hollow remedy as a creditor can be handed — and it is hollow by design.

Strip away the headline and Lindbergstands for three propositions, each favoring the planner who did the work in advance. The charging order is a real remedy: a creditor can and will obtain one against a resident’s foreign-company interest, and any structure premised on the creditor never getting an order was wishful thinking. It is also a cappedremedy: a lien on distributions, unable to compel a distribution, reach company assets, or regulate the company’s internal affairs — the court said so in terms. And the cap is set by the company’s organizing law: exclusivity, the bar on foreclosure, protection for the single-member company, and — in Nevis — the refusal to treat the order as a lien or a tax payment as a distribution, are all features the planner selects by choosing where to organize.

Far from proving that foreign companies fail when their owner lives elsewhere, Lindberg proves that a foreign company, organized in the right jurisdiction, does exactly what it is meant to do even after the creditor wins. The creditor’s victory was a lien on an empty mailbox. That is not a failure of the structure. That is the structure.

This note is for general planning discussion and is not legal advice. Statutes and decisions change, and outcomes turn on the particular facts and the governing jurisdiction; obtain advice tailored to your circumstances before acting.