Setting up a limited liability company or LLC is one way to shelter assets from creditors so you can keep the wealth you have earned.You can rely on a Florida asset protection lawyer at Kramer Green to work diligently to protect your business and all its assets from creditors to the greatest extent possible.
Defining an LLC in Florida
Chapter 605 of the Florida Statutes contains the Florida Revised Limited Liability Company Act, which governs LLC establishment, operation, and dissolution. An LLC is a common business entity in Florida that has the asset protection benefits of a corporation but the flexibility of a sole proprietorship or partnership.
A manager in a manager- managed LLC, directs and operates the LLC’s daily business affairs. Owners or members invest in LLCs and can incur gains or losses from their proportionate shares in the LLC, if taxable as a partnership or “S” corporation. An individual can be both a manager and a member; however, a manager also can be a non-member. LLCs operate according to an operating agreement, which defines their structure, member voting rights, distribution rights, and more. One huge benefit of LLCs is that they do not require all the formalities of a corporation, and they are not taxable as separate entities, unless “C” corporation status is elected.
How a Multi-Member LLC Shields Assets
An LLC generally protects your assets from debts that your company owes. In other words, if creditors attempt to collect debts your business owes, the LLC shields your personal assets from those collection efforts. As a result, creditors can only reach assets that belong to the LLC.
Likewise, suppose a creditor or another party sues a member of a multi-member LLC. In that case, the member’s interest in the LLC is not subject to the creditor’s collection efforts. The member’s interest is the membership interest and not a proportionate share of assets owned by the LLC. As a result, the member can keep a business interest sheltered from the creditor’s reach, even though the creditor has a judgment against the member personally.
When a creditor obtains a personal judgment against a creditor, it can execute or try to collect its judgment from the member’s personal non-exempt assets. Although an LLC membership is not an exempt asset, the creditor cannot collect from the member’s interest in a multi-member LLC by seizure or garnishment.
Florida Statute 605.0503 provides the creditor’s only remedy in this situation: a charging order against the member’s interest in the LLC. The creditor can ask for a charging order in the court that issued the judgment in favor of the creditor. This charging order gives the creditor the right to place a lien on and thus attach any proceeds that the member receives from the LLC. However, if the member receives no cash or other property distributions, then the creditor receives nothing by virtue of its charging lien.
Single-Member LLCs
A single-member LLC, or an LLC with only one member, does not provide the same level of protection as a multi-member LLC under Florida law. Creditors that have a judgment against an individual who owns an LLC can execute that interest through foreclosure and other types of collection remedies. A creditor has this option if it can demonstrate that a charging order will not allow it to satisfy its judgment within a reasonable time.
Allow Us to Help You Protect Your Assets Today
An asset protection attorney at Kramer, Green, Zuckerman, Greene & Buchsbaum, P.A. is ready to assist you in protecting your business from the reach of creditors. We know how hard you have worked to build your business and want to help you preserve it.
As a result, our objective is to take any actions necessary to protect your business for your and your family’s benefit. Contact our office today at (954) 966-2112 or reach out to us online to schedule a time to discuss your legal issues with our attorneys.