You want the best protection possible
for your assets. You want to use the
strongest LLC entity available. But if you
live in a weak asset protection state (like
California) and set up your LLCs in a strong
state (such as Wyoming) which state law
applies? In an outside attack where a car
wreck victim has won in court and is seeking
to collect, the old standard lawyer answer is: It
depends.
If you live in California and hold your Wyoming
LLC membership interest (your certificate
representing ownership) in California, that certificate
is your personal property in California. Your Wyoming
LLC can then be subject to the jurisdiction of a
California court. In such a case California’s weaker
laws will apply.
However, with some careful planning and by actually
holding the physical Wyoming LLC certificates in Wyoming,
the stronger asset protection of Wyoming law can apply.
(Please note that we will use California and Wyoming in our
discussion but any weak state/strong state scenario will
apply.)
A membership interest in an LLC may be held in two ways:
(1) as a certificated security; or (2) as an uncertificated
security. A certificated certificated security is a declared
ownership interest (like a corporation’s stock certificate)
represented by a properly prepared and held certificate.
An uncertificated security is an ownership that is not
represented by a properly prepared certificate. See, UCC
8102(4), (18).