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Florida Loses Asset Protection
The Supreme Court of Florida took away a key asset protection benefit in deciding Olmstead v. Federal Trade Commission (SC 01-109, Fla. June 24, 2010). Before the ruling, a charging order was the exclusive remedy, whereby the judgment creditor (the person who won a lawsuit) could only receive distributions from the LLC. Now, a judgment creditor may directly seize the ownership interest of a member in a single member LLC.
The Olmstead decision allows Florida courts to order a judgment debtor to surrender all right, title, and interest in the debtor’s single-member Florida LLC to satisfy a judgment. Prior to the ruling, many had believed that Florida law provided that the charging order was the exclusive creditor remedy. Not anymore. Multi-member Florida LLC owners should be very concerned by this decision.
Justice Lewis wrote: “The majority opinion now eliminates the charging order remedy for multi-member LLCs under its theory of ‘nonexclusivity’ which is a disaster for those entities.”
If you are using a Florida LLC to protect your assets, you may want to reconsider your state of formation. Wyoming allows LLCs to easily reform themselves into Wyoming. The continuance process allows a Florida LLC to reorganize in Wyoming and keep the same formation date, EIN number, and credit history.
The advantage is that you now have a Wyoming LLC, which expressly recognizes the charging order as the exclusive remedy. Our office charges $995* plus filing fees to continue LLCs to the better asset protection state of Wyoming. Please call 1-800-600-1760 for more information.
And remember, asset protection is an ever-changing area of the law. The Olmstead case was decided in a way that allowed another government agency – The Federal Trade Commission – to collect. Of course, the case now applies to the benefit of all creditors. In a dynamic field, it is important to stay current on the latest cases and move accordingly.
*Fees are subject to change. Please obtain a quote from an Incorporating Specialist for up-to-date fees.
About the Author
Garrett Sutton, Esq.
Principle Partner
Ted Sutton is a Junior Partner at Corporate Direct, where he advises business owners on entity formation, regulatory compliance, and asset protection. Licensed in Nevada, Texas, and Wyoming, Ted helps make complex legal concepts practical and accessible for clients nationwide.
