Asset Protection Issues When Debtor’s File Their Own LLCs On Florida Website

You can file a new LLC yourself at Florida’s business website: www.sunbiz.org. The website has the forms with instructions, and it take just a few minutes. File your own LLC and save legal fees. It appears to be very simple. Yet, my experience is that about half the asset protection clients with a “do-it-yourself” LLC screw it up.

The Sunbiz form requires that you name at least one LLC manger and that you designate that manager as either “mgr” or “mgrm.” You are not required to file with the State the owners of the new LLC. Ownership can be determined as part of the operating agreement which is a private contract. However, when you designate an individual as an “mgrm” you are telling the State and the world that the person has an undivided  ownership interest in the LLC.

Here is an example of the problem. A husband and wife want to start a new business as an LLC to be run and managed by the husband but owned jointly as tenants by entireties. The husband assures his wife: “don’t worry, I can do it myself.” Husband files the new LLC on Sunbiz and puts his own name as “mgrm”. He is the manager and he is also an owner so the “mgrm” designation seems to fit. However, the husband arguably has registered an individual ownership position in the LLC which is inconsistent with his intention to own all the equitable membership interest as tenants by entireties. You cannot tell your creditors you hold all your LLC membership interests by the entireties if you previously have told the State of Florida(or the IRS) that you have an individual interests.

The above hypothetical example is but one of many problems I have seen with LLCs formed by legally  unsophisticated business owner who  find themselves seeking asset protection of their LLC ownership. My advice: do it yourself at Home Depot, but not a Sunbiz.org.

Last updated on June 18, 2022