On June 24, 2010 the Florida Supreme Court called into question the use of limited liability companies for creditor protection here in Florida in the case of Olmstead v. F.T.C. Generally speaking, it became clear that a single member LLC would not provide asset protection and it was questionable whether a multiple-member LLC would provide protection from creditors. For a summary of the Olmstead, see Florida Supreme Court Compromises Asset Protection Offered By LLC’s.
The Florida legislature has now adopted legislation to remedy the Olmstead problem. As it relates to multiple-member LLC’s, the legislation clarifies that a charging order is a creditor’s exclusive remedy, such that the creditor will not be permitted to take ownership of the LLC membership interest of the debtor and is only entitled to receive the debtors “distributions” to the extent the LLC elects to make distributions. For single member LLC’s the legislation provides that a charging order is the sole remedy unless the creditor can establish to the court that the charging lien will not satisfy the judgment within a reasonable amount of time.
The results . . . multiple-member LLC’s offer the asset protection we assumed prior to Olmstead and single member LLC’s are somewhat protected depending on the circumstances.
