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Forced Sales of Equity Interests: Corporate Stock, LLC and Partnership Interests, Charging Orders

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Forced Sales of Equity Interests: Corporate Stock, LLC and Partnership Interests, Charging Orders

Asset page. Legal information, not legal advice. Last verified: 2026-10-16.

What it is

A creditor of a business owner — not of the business itself — can sometimes force a sale of the owner’s equity. The business keeps operating, keeps its assets, and keeps every one of its liabilities; only the owner changes. What the buyer receives depends on the form of the interest:

InterestHow a judgment creditor reaches itWhat the buyer receives
Certificated corporate stock”actual seizure of the security certificate by the officer making the attachment or levy” (UCC § 8-112(a))The shares, with voting and economic rights, subject to transfer restrictions on the certificate and in the charter/bylaws (needs_verification per state)
Uncertificated stock”legal process upon the issuer at its chief executive office in the United States” (UCC § 8-112(b))Same
Stock held in a brokerage accountProcess “upon the securities intermediary” (UCC § 8-112(c))Security entitlement
LLC interestCharging order; foreclosure of the charging-order lien only where the state permitsUsually only the transferable interest (distributions), not membership or management
Partnership interestCharging order (e.g., 6 Del. C. § 17-703 for limited partnerships)Same as LLC

A pledgee (a lender holding equity as collateral) proceeds differently, under UCC Article 9; see ucc-article-9-sales-of-a-business and the “Secured-party sales of equity” section below.

Corporate stock: UCC Article 8 creditor’s legal process

Model UCC § 8-112 (Cornell LII reproduction, https://www.law.cornell.edu/ucc/8/8-112 , retrieved 2026-10-16; the state’s enactment controls):

  • “(a) The interest of a debtor in a certificated security may be reached by a creditor only by actual seizure of the security certificate by the officer making the attachment or levy, except as otherwise provided in subsection (d). However, a certificated security for which the certificate has been surrendered to the issuer may be reached by a creditor by legal process upon the issuer.”
  • “(b) The interest of a debtor in an uncertificated security may be reached by a creditor only by legal process upon the issuer at its chief executive office in the United States.”
  • “(c) The interest of a debtor in a security entitlement may be reached by a creditor only by legal process upon the securities intermediary with whom the debtor’s securities account is maintained.”
  • “(d) … a certificated security for which the certificate is in the possession of a secured party, or … an uncertificated security registered in the name of a secured party … may be reached by a creditor by legal process upon the secured party.”
  • “(e) A creditor … is entitled to aid from a court of competent jurisdiction, by injunction or otherwise, in reaching the certificated security … or in satisfying the claim by means allowed at law or in equity in regard to property that cannot readily be reached by other legal process.”

Practical consequences: a levy that does not physically seize the certificate does not reach certificated stock (absent the surrender exception); for uncertificated shares the process is served on the issuer, and the buyer at the execution sale must then be registered by the issuer. “Delivery of an uncertificated security to a purchaser occurs when … the issuer registers the purchaser as the registered owner” (UCC § 8-301(b)(1), https://www.law.cornell.edu/ucc/8/8-301 , retrieved 2026-10-16). Each state’s enacted Article 8 and its execution statute control the sale procedure (needs_verification per state).

Is an LLC interest a “security”? “An interest in a partnership or limited liability company is not a security unless it is dealt in or traded on securities exchanges or in securities markets, its terms expressly provide that it is a security governed by this Article, or it is an investment company security” (UCC § 8-103(c), https://www.law.cornell.edu/ucc/8/8-103 , retrieved 2026-10-16). If the operating agreement “opts in” to Article 8, § 8-112 governs how a creditor reaches it; otherwise the LLC statute’s charging-order provision does.

LLC interests: charging orders and whether they can be foreclosed

The uniform (RULLCA) pattern — foreclosure allowed, buyer gets only the transferable interest

The Revised Uniform Limited Liability Company Act’s charging-order section, as enacted in California and Minnesota (the uniform text itself was not separately retrieved), provides:

  • A court “may enter a charging order against the transferable interest of the judgment debtor”; the order “constitutes a lien” and “requires the limited liability company to pay over to the person to which the charging order was issued any distribution that would otherwise be paid to the judgment debtor.” The court may appoint a receiver of distributions.
  • “Upon a showing that distributions under a charging order will not pay the judgment debt within a reasonable time, [the court may] foreclose the lien and order the sale of the transferable interest. The purchaser at the foreclosure sale obtains only the transferable interest, does not thereby become a member, and is subject to [the transfer section].”
  • Before foreclosure, the member may extinguish the order by satisfying the judgment, and the LLC or other members may pay the judgment and “succeed to the rights of the judgment creditor.”
  • The section is “the exclusive remedy” for a judgment creditor against the transferable interest.

Sources: Cal. Corp. Code § 17705.03(a)–(f) (https://california.public.law/codes/corporations_code_section_17705.03 , retrieved 2026-10-16, unofficial reproduction; official leginfo returned HTTP 403); Minn. Stat. § 322C.0503, subds. 1–7 (https://www.revisor.mn.gov/statutes/cite/322C.0503 , retrieved 2026-10-16).

What “transferable interest” means for the buyer. In Minnesota, a transfer “does not entitle the transferee to: (i) participate in the management or conduct of the company’s activities; or (ii) … have access to records or other information concerning the company’s activities,” but the transferee “has the right to receive, in accordance with the transfer, distributions to which the transferor would otherwise be entitled,” and in a dissolution is entitled to an account only from the date of dissolution — Minn. Stat. § 322C.0502, subds. 1–3 (https://www.revisor.mn.gov/statutes/cite/322C.0502 , retrieved 2026-10-16). The buyer cannot vote, cannot force distributions, and depends on the remaining members’ management.

Washington allows foreclosure “at any time”: “The court may order a foreclosure upon the transferable interest subject to the charging order at any time. The purchaser at the foreclosure sale has the rights of a transferee.” Before foreclosure the interest may be redeemed by the debtor, by other members with non-LLC property, or by the LLC with the consent of the uncharged members — RCW 25.15.256(2)–(3) (https://app.leg.wa.gov/RCW/default.aspx?cite=25.15.256 , retrieved 2026-10-16).

Delaware and Texas — no foreclosure

  • Delaware. “The entry of a charging order is the exclusive remedy by which a judgment creditor of a member or a member’s assignee may satisfy a judgment out of the judgment debtor’s limited liability company interest and attachment, garnishment, foreclosure or other legal or equitable remedies are not available to the judgment creditor, whether the limited liability company has 1 member or more than 1 member.” The creditor “has only the right to receive any distribution,” and has no right to LLC property. — 6 Del. C. § 18-703(a), (d), (e) (https://delcode.delaware.gov/title6/c018/sc07/index.html , retrieved 2026-10-16). The same rule applies to limited-partnership interests (6 Del. C. § 17-703(d), https://delcode.delaware.gov/title6/c017/sc07/index.html , retrieved 2026-10-16).
  • Delaware’s default rule for any assignee: it “shall have no right to participate in the management of the business and affairs of a limited liability company except as provided in a limited liability company agreement or … upon the vote or consent of all of the members” — 6 Del. C. § 18-702(a) (same retrieval).
  • Texas. “The charging order lien may not be foreclosed on under this code or any other law,” the charging order is the exclusive remedy, and the rule “applies to both single-member limited liability companies and multiple-member limited liability companies.” — Tex. Bus. Orgs. Code § 101.112(c), (d), (g) (https://tcss.legis.texas.gov/resources/BO/htm/BO.101.htm , retrieved 2026-10-16). The same no-foreclosure, exclusive-remedy rule covers general and limited partnership interests (§§ 152.308, 153.256). One recognized exception: where the judgment creditor is the LLC itself and the judgment awarded it the member’s interest, turnover of that interest is proper (gillet-v-zupt-2017). The rule is stated for a member’s judgment creditor; secured-party sales of pledged interests are treated separately below. See texas 12.5.

Delaware stock seizure is separate. deng-v-hk-xu-ding-2023 concerns the particular § 324 certificate-seizure procedure, not an LLC charging-order foreclosure. The Delaware Supreme Court affirmed January 17, 2024; deng-v-hk-xu-ding-2024 records that actual appeal, not a pending/unlocated disposition or comprehensive treatment of every § 324 exception.

Florida — foreclosure only for single-member LLCs (after Olmstead)

In olmstead-v-federal-trade-commission-2010, 44 So. 3d 76 (Fla. 2010), the Florida Supreme Court held that the then-existing “statutory charging order provision does not preclude application of the creditor’s remedy of execution on an interest in a single-member LLC,” so a court could order a judgment debtor “to surrender all right, title, and interest in the debtor’s single-member LLC.” The current statute codifies a narrower rule:

  • For a single-member LLC, if the creditor shows “that distributions under a charging order will not satisfy the judgment within a reasonable time,” the court “may order the sale of that interest … pursuant to a foreclosure sale” — Fla. Stat. § 605.0503(4).
  • In that case “[t]he purchaser at the court-ordered foreclosure sale obtains the member’s entire limited liability company interest, not merely the rights of a transferee”; “becomes the member”; and the debtor “ceases to be a member” — § 605.0503(5).
  • For a multi-member LLC, foreclosure “is not available … and may not be ordered by a court” — § 605.0503(6).
  • The section does not limit a consensual secured creditor’s remedies, fraudulent-transfer law, or alter-ego and similar equitable doctrines — § 605.0503(7). (http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0600-0699/0605/Sections/0605.0503.html , retrieved 2026-10-16.)

Arizona — exclusive judgment-creditor remedy

A.R.S. § 29-3503, full text retrieved 2026-10-17, makes a charging order the exclusive remedy for satisfying a judgment from a member’s or transferee’s transferable interest. The section contains no express foreclosure power or single-member exception. This does not decide a consensual security-interest foreclosure or a sale of the LLC’s own assets; neither is ordinary judgment execution against a member’s distributions. Do not treat a stock/Article 8 levy as automatic authority to acquire Arizona LLC membership. See arizona for the bounded analysis and remaining questions.

Louisiana — ordinary single-member judgment execution

R.S. 12:1331 gives the charging creditor assignee rights; §§ 1330 and 1332 distinguish financial rights from admission and management. aok-property-investments-v-boudreaux-la-m12-2020 rejects ordinary seizure of the sole member’s entire interest on its record without reverse piercing; it does not adopt Florida’s historical Olmstead rule. No membership or direct LLC-asset ownership follows merely from the charging remedy. Exceptional reverse-piercing or security-foreclosure theories are separate questions, not adjudicated by that ordinary-execution holding.

Colorado — current admission law versus Albright

Current §§ 7-80-701/702/703 contemplate charging/foreclosure, but an unadmitted assignee ordinarily gets distributions, not automatic management. Admission when no members remain has its specified last-member-assignee consent rule, not automatic bidder membership. in-re-albright-2003 concerns a Chapter 7 trustee and the 2003 statute; it is not universal ordinary-creditor single-member execution authority. The actual McClure opinion, 2017 CO 22 requires effective/enforceable competing charging orders, not merely service priority. See colorado for retained treatment and exceptional-theory questions.

Oregon — a charge is not the sole-member assignment exception

ORS 63.259 gives the judgment creditor assignee rights to the charged extent, without a membership-count carve-out. Section 63.249(7) says a lien/encumbrance is not itself an assignment. Distinguish the actual-assignment defaults: where the assignment otherwise leaves no members, § 63.245(2)(c) admits the assignee simultaneously; § 63.265(2)(b) similarly addresses cessation of the only member’s interest. Check the articles/operating-agreement qualifications. These rules do not authorize an otherwise unestablished foreclosure of a charged interest or give management merely from a charge. See oregon; its separate foreclosure-authority question remains open. Actual statutory text retrieved 2026-10-17; no foreign bankruptcy holding substitutes for it.

Indiana — entity process and economic rights, not automatic control

Official 2026 IC23-18-6-7 gives the charging creditor distributional/assignee rights, not membership or management merely from the charge. brant-v-krilich-in-2005 requires entity notice/proof; crider-v-crider-in-2014 rejects the automatic control transfer and distinguishes stock-sale/first-refusal alternatives. Do not invent a sole-member exception from those holdings. Partnership foreclosure has its own §§23-4-1-27–28 rules and economic-rights scope. See indiana 12.5 for the official 2026 statute text and full opinions.

South Carolina — foreclosure transfers the distributional interest

Section33-44-504 permits court foreclosure of a charging lien; the purchaser has transferee rights, not automatic membership or ownership of the LLC’s assets. The section contains no special single-member carveout. Partnership remedies need their own provisions: limited-partnership §33-42-1230and the §33-42-2020general-partnership supplementation must not be presented as identical text or as direct seizure of entity assets. See south-carolina for the actual distinct routes.

Minnesota — foreclosure does not convey the company’s assets

Section322C.0503 permits the specified charging-lien foreclosure, conveying the transferable economic interest rather than automatic membership/management rights. It does not create a special single-member admission rule. General- partnership §323A.0504 and limited-partnership §321.0703 are distinct provisions. Article8’s stock-execution method is not direct ownership of LLC assets. See minnesota for each actual route.

Nevada — charging-only bars are affirmative law

The LLC and limited-partnership statutes bar charging-lien foreclosure, subject to their express written creditor-agreement savings; qualifying closely held corporate stock also has the §78.746charging-only rule, whose publicly traded-company/subsidiary exclusion must be respected. General-partnership §§87.280/.4342depend on the governing-law election and concern the economic interest, not automatic management or entity assets. Tupper’s historical limited-partnership sale cannot override modern chapter87A; Savage Construction applied California law, not a general Nevada foreclosure permission. Consensual security enforcement is a separate question. See nevada for exact eligibility, entity regimes and case limits.

Comparison

Arkansas2025amendment — no charging-order foreclosure. The actual Act461 replaces §4-38-503’s former foreclosure provisions: the charging-order lien cannot be foreclosed under this subchapter or other law, for single- and multiple-member LLCs alike. The old sole-member sale/confirmation/membership exception is deleted. Qualifying consensual UCC security and written pledges remain separately preserved; a member’s judgment creditor does not thereby acquire the LLC’s property. See arkansas for source/currentness boundaries.

StateCharging order exclusive?Foreclosure of charged interestBuyer receives
CaliforniaYes (§ 17705.03(f))Yes, on showing distributions won’t pay judgment in reasonable time (§ 17705.03(b)(3))Transferable interest only; not a member
MinnesotaYes (§ 322C.0503, subd. 7)Yes, same showing (subd. 3)Transferable interest only; not a member
WashingtonYes (RCW 25.15.256(5))Yes, “at any time” (RCW 25.15.256(2))Rights of a transferee
FloridaYes, except single-member foreclosure (§ 605.0503(3))Single-member only, on showing (§ 605.0503(4), (6))Single-member: entire interest; buyer becomes member (§ 605.0503(5))
DelawareYes (§ 18-703(d))No, single- or multi-membern/a
TexasYes (§ 101.112(d))No, single- or multi-member (§ 101.112(c), (g))n/a
ArizonaYes, judgment-creditor capacity (§ 29-3503(E))No express foreclosure power or single-member exception in retrieved sectionCharging order redirects distributions; not a membership sale
LouisianaExclusive ordinary judgment-creditor remedy on AOK’s no-reverse-piercing recordSole-member interest not ordinarily seizable under that holding; exceptional theories separateFinancial assignee rights under §§ 12:1330–1332; not membership or LLC assets

▸ For Buyers / Operators — Outside Florida’s single-member rule, a buyer at a charging-order foreclosure acquires an economic interest with no vote, no information rights (in RULLCA states), and no ability to compel distributions. Pricing depends on the operating agreement’s distribution and transfer provisions and on the remaining members, who may also redeem before the sale (RCW 25.15.256(3); Cal. Corp. Code § 17705.03(d)). The LLC’s own liabilities remain in the entity.

▸ For Owners / Debtors — The member can extinguish the charging order by paying the judgment before foreclosure (Cal. Corp. Code § 17705.03(c); Minn. Stat. § 322C.0503, subd. 4), and exemption laws still apply (Cal. § 17705.03(e); 6 Del. C. § 18-703(c)).

Secured-party sales of equity (pledged stock and LLC interests)

A lender that took a security interest in equity (common in mezzanine real-estate and acquisition financing) can foreclose without a court under UCC Article 9 — a contractual route that charging-order statutes expressly preserve (Fla. Stat. § 605.0503(7)(a)). Key rules:

  • Control. A purchaser has “control” of a certificated security in registered form if the certificate is delivered and indorsed or registered in its name, and of an uncertificated security if it is registered to the purchaser or “the issuer has agreed that it will comply with instructions originated by the purchaser without further consent by the registered owner” (UCC § 8-106(b)–(c), https://www.law.cornell.edu/ucc/8/8-106 , retrieved 2026-10-16). Lenders on LLC interests commonly require the LLC to opt into Article 8 (UCC § 8-103(c)) so that control is available.
  • Commercially reasonable disposition. “Every aspect of a disposition of collateral, including the method, manner, time, place, and other terms, must be commercially reasonable” (UCC § 9-610(b), https://www.law.cornell.edu/ucc/9/9-610 , retrieved 2026-10-16).
  • Public versus private sale and lender credit bids. The secured party may buy “at a public disposition” but at a private disposition “only if the collateral is of a kind that is customarily sold on a recognized market or the subject of widely distributed standard price quotations” (§ 9-610(c)). Interests in a private LLC are not sold on a recognized market, so a lender that wants to credit-bid generally must run a public disposition. Whether a particular auction is “public” is a fact question (needs_verification for state case law).
  • Notice. Ten days’ notice is a safe harbor in non-consumer transactions (UCC § 9-612(b)), and notice is not required for collateral “of a type customarily sold on a recognized market” (§ 9-611(d)).
  • Securities-law overlay. Sales of pledged equity may raise federal and state securities-law questions (registration exemptions, restricted securities, offering to a limited bidder pool); not researched here (needs_verification).
  • What the buyer receives. “[A]ll of the debtor’s rights in the collateral” (UCC § 9-617(a)(1)) — i.e., whatever the pledgor had. Whether the buyer of a pledged LLC interest is admitted as a member, or receives only a transferable interest, depends on the operating agreement and the LLC statute: in Delaware an assignee is not a member without consent unless the LLC agreement provides otherwise (6 Del. C. § 18-702(a), (b)(1)). Lenders typically obtain that consent in advance in the LLC agreement or a pledge acknowledgment (needs_verification as to enforceability in each state).

Stock levy versus asset purchase

A buyer of a controlling stock or membership position inherits the entity’s contracts, permits, employees, tax history and litigation unchanged. That can preserve non-assignable licences (the licensee is unchanged), but some licences and contracts treat a change of control as a transfer: an FCC licence cannot be transferred “by transfer of control of any corporation holding such permit or license” without Commission consent (47 U.S.C. § 310(d), https://www.law.cornell.edu/uscode/text/47/310 , retrieved 2026-10-16), and for a Florida quota liquor licence issued under § 561.20(1) and transferred within three years of issuance, “[a]ny change of ownership in any manner, either directly or indirectly, including any change in stock, partnership shares, or other form of ownership of any entity holding the license shall be considered a transfer” (Fla. Stat. § 561.32(4)(a)–(b)). See intellectual-property-and-licenses.

Leading cases

businesses-and-going-concerns, ucc-article-9-sales-of-a-business, llc-entity-ownership, entity-structuring-for-investing, buying-a-business-at-a-forced-sale, intellectual-property-and-licenses

needs_verification

  • RULLCA § 503 uniform text (verified only through California and Minnesota enactments).
  • State execution procedure for levying and selling stock under each state’s Article 8.
  • State case law on “public” disposition of pledged LLC interests and on securities-law limits in UCC sales of equity.
  • Enforceability of pre-agreed member-admission provisions for pledgee or foreclosure buyers.
  • Corporate stock transfer restrictions binding an execution purchaser.

Kansas and Missouri — judgment-creditor charges are not every transfer

Kansas 17-76,113 makes charging the exclusive judgment-creditor remedy and prohibits the stated foreclosure/attachment/garnishment. That is not a ban on every voluntary assignment or consensual security enforcement under other applicable law. Missouri 347.119 and DiSalvo do not authorize statutory or equitable foreclosure of the charged LLC interest. Missouri’s 358.280 general-partnership remedy and compatible 359.671 limited-partnership incorporation are different. Neither state rule lets an individual member’s judgment creditor sell the company’s assets as that member’s property. See kansas and missouri.

Alabama — charging-only judgment collection

The enacted LLC § 10A-5A-5.03, general-partnership § 10A-8A-5.03 and limited-partnership § 10A-9A-7.03 expressly prohibit judgment-creditor foreclosure of the charging lien or transferable interest. The creditor receives the specified distributions, not management, possession of entity assets or a court-ordered sale of the interest under this remedy. No statutory single-member exception is supplied. These judgment-creditor restrictions do not automatically prohibit a separately authorized consensual collateral transfer under Article 9. See alabama for the actual process and source boundaries.

Mississippi — LLC exclusivity differs from partnership foreclosure

Enacted LLC § 79-29-705 states the exclusive charging/distribution remedy without foreclosure or a single-member-creditor exception. Section 707’s admission provision after an assignment leaving no members does not itself create a foreclosure remedy.

General partnership § 79-13-504 permits foreclosure; limited partnership § 79-14-703 requires its reasonable-time distribution finding. Purchasers acquire economic rights, not automatic partner status. The full historical Title 79 reproduction is on an unofficial host; mississippi documents the bounded later primary-enactment/currentness comparison. Do not transfer GP/LP powers to the distinct LLC remedy.

Sources

▸ For Buyers / Operators — First question: does the state allow foreclosure of a charged LLC interest at all, and does the buyer become a member? See the comparison table.

▸ For Owners / Debtors — Payoff before foreclosure extinguishes the charging order in the RULLCA states; Delaware and Texas do not permit foreclosure.

This page provides general legal information, not legal advice. Business-entity, securities and secured-transactions law is technical, changes, and varies by state; its application is fact-specific. Nothing here creates an attorney-client relationship. Verify every statute, rule and holding against the current primary source and consult a licensed attorney before acting. Last verified: 2026-10-16.

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