Hi. This is Lee Phillips. I’m an attorney. Don’t hold that against me. I want talk to you for two
seconds about charging orders. They are a form of
asset protection. They’re basically the
reverse of the corporations– or the corporate shield–
that protects you from what happens in the company. The charging order
protects the company assets from what happens to you. I need to give you a little
history lesson first. 400 years ago in
England, the only type of business structure that
we had was a partnership. So you and I, we build
this partnership, and we build it for 30 years,
and it’s a great company. And then I get in trouble. And how do you get trouble
400 years ago in England? I don’t know. You don’t pay your taxes. You hit the guy with
your horse and carriage. You get divorced, get
sick, I don’t know. But you got in trouble. I got in trouble,
and I lose my assets. One of my assets is my
partnership interest in our company. Well, when I was my assets to
my creditor, that guy comes in and he stands in my place. He’s a partner with you. You just got a new partner. You got my ex as
your new partner. And the funny thing is, in
a partnership, the partner– any one of the partners– they
can sell assets of the company. They can buy the company. They can do anything they want. You just lost your company
is the bottom line. That’s not fair. I mean, you worked 30 years. You didn’t get in trouble, and
you just lost your company. And the Brits said,
well, that’s not fair. So they said, OK,
what we’re going to do is we’re going
to create a law so that when Philips
loses his partnership interest in this deal, the
guy who gets it, his creditor, can’t come and stand
as a full partner. He has to get the
judgment against me. Then he has to go
back to court and get an order which
charges my partnership interest with his debt. But he can’t come in. He can’t walk in,
manage the company. You’re still the manager. You get to control what happens. He can’t sell the company. He can’t sell the
assets of the company. He can’t buy the company. All he can do is get this
charging order– charge the company with
the debt– which means if the partnership
has a profit, he gets my piece of the profit. If it has a loss, he gets
my piece of the loss. And so he stands in what
we call my economic shoes, but he doesn’t have
management control. That’s a big deal. Let’s take it back
to current day. OK, you and I have
our corporation. I get in trouble. The guy’s going to come in. He’s going to take my assets. My assets in the corporation–
S Cort, C Corp, doesn’t matter– is the stock. So he gets my stock. He’s now a full voting
member with you. If I happen to own a
majority of this company, he now owns the company. If you’re the only owner, and
you get in trouble personally, they just got your company. If, however, it’s a limited
partnership or an LLC, and you’re going to use an LLC,
then they have to go to court, get the judgment, and then get
the order charging the company. They can’t come and get
the assets of the company and all that sort of stuff. There are some
wrinkles in the law in this, particularly in
Utah, Colorado, and Florida right now. But, basically, he can’t come
and get the company assets. You still manage the company. You can take all the profit. And the funny thing is
you’re going to figure out how to take all the profit. So it becomes a very good
asset protection tool because this guy is now in a
position where he can’t really get to the company money or
assets, and you go to him and say, you can’t really get
to the company money or assets. Why don’t we settle this
for a dime on the dollar? That’s good asset
protection, guys. The charging order is critical. Corporations don’t have it. LLCs, Limited
Partnerships, do have it, and your attorneys never
talk to you about it.