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.