Single Member LLC Florida Asset Protection
Single member LLC Florida asset protection is important if you want to make sure your assets are secured.3 min read
Single member LLC Florida asset protection is important if you want to make sure your assets are secured. Forming a limited liability company (LLC) is often an effective asset protection plan, as the LLC's assets are typically protected from individual owners' lenders and creditors. However, Florida's Supreme Court has shown that a single-member LLC may not, in fact, be protected from their creditor.
Important Terms in LLC Florida Asset Protection
If you've moved an asset to an LLC in order to keep the asset out of the lender's hands, Florida law allows the lender to bring charges against the LLC. Even if you did so with good intentions, if you moved it within a certain time frame, and you did not receive adequate value in exchange, it may be considered a fraudulent transfer. The concept of adequate value is known as consideration. Consideration is an important and multi-layered concept in law, and you will not learn the nuances of acceptable consideration through browsing the Internet.
- Charging order
A charging order states that any distributions from the LLC to the debtor member must go directly to the creditor. The member retains their interest, and the creditor receives the distribution.
- Revised Uniform Limited Liability Act
Florida recently adopted this code, which includes specific rights regarding LLC asset protection that many other states do not have. Unlike states with long histories of interpreting this code, Florida courts can essentially invent the outcome.
The Olmstead Case
The Florida Supreme Court made an impactful decision regarding asset protection in the landmark Olmstead v FTC (2010) case, in which the personal protection of a single member LLC is now uncertain. Before the Olmstead case, a creditor of an LLC member could not claim title to the member's interest in the company in order to satisfy debt, but instead could only acquire a charging order against the debtor.
In the Olmstead case, the Federal Trade Commission (FTC) was granted a $10 million judgment against Shaun Olmstead and Julie Connell, which it wished to collect by seizing two of Shaun's single-member LLCs. The Supreme Court examined Florida Statute section 56.061, which generally covered the right of creditors to take debtors' assets. The statute describes allowing the seizure of corporate stock to satisfy the debt, but did not cover a debtor's interests in their LLCs.