Charging Orders and Professional Firms

Charging Orders and Professional Firms

 

            A recent letter decision from Virginia addresses and rejects the assertion that a charging order cannot be issued against an interest in a professional LLC, or at minimum may be issued only in favor of a person similarly licensed in the profession.  Southern Bank and Trust Company v. Joshi, Civil Docket No. CL14-5435, letter decision of April 20, 2015 (Fourth Judicial Cir. Of Va, Cir. Ct. City of Norfolk, Judge John R. Coyle III).

            Southern Bank held a judgment against Joshi, and moved for a charging order against his interest in an accounting professional LLC. 

            The only issue before the Court is the legal question of whether the provisions of Virginia Code Section 13.1-1041.1 to apply to a PLLC; and more specifically whether the Court can enter a charging order … against a member of a PLLC on behalf of a creditor who is not a member of the profession engaged in by the PLLC.

The Court found that a charging order may be entered against the interest of a professional in a PLLC just as it can against any interest in an LLC that is not a PLLC.

 

While not referenced therein, this decision is consistent with FirstMerit Bank, N.A. v. Xyran, Ltd., 2013 WL 1183340 (Ohio App. 8 Dist. March 21, 2013):

 

 “Because the charging order merely allows FirstMerit to garnish Bhupinder’s financial interest in The Center, it does not allow the unauthorized practice of medicine or violate the terms of the operating agreement.”