The Eleventh Circuit Court of Appeals has asked the Florida Supreme Court to resolve an important issued about asset protection benefits of a limited liability company. The Florida Statutes state that a creditor’s remedy against a judgment debtor’s membership interest in a limited liability company is a charging order against the LLC’s distributions to the debtor member. Some attorneys have raised the issued of whether limitation of collection remedies applies to membership interests in a single member LLC when the debtor is the single member. A few courts in other states suggested that single member LLCs do not have the same protection from creditor collection as do multi-member LLCs. Most states have not distinguished between LLC protection on the basis of membership number. The issue have never been addressed by any Florida court.
The Eleventh Circuit Court of Appeals, in a decision dated May 29, 2008,certified to the Florida Supreme Court the following question: “Whether, pursuant to Fla. Stat. 608.433(4) a court may order a judgment-debtor to surrender all ‘right, title and interest’ in the debtor’s single-member limited liability company to satisfy an an outstanding judgment.” The appeals court recognized that the Florida Statute restricting creditor remedies does not distinguish between single-member LLCs and multi-member LLCs. On the other hand, the Court noted that Florida’s LLC Act states that a member ceases to be a member upon the assignment of his LLC interest (a charging lien is an assignment), and if a single-member LLC assigns all of its membership interest to the creditor the LLC is left without a member with authority to take necessary management actions on behalf of the LLC.
The Florida Supreme Court may resolve the issue. The case is FTC v. Olmstead et. al. Circuit Case No. 06-13254