Florida has enacted a statute specifically dealing with single member limited liability companies. The statute authorizes single member LLCs. The statute includes creditor remedies to collect a judgment from a debtor’s membership interest in the debtor’s single member LLC.
Generally, a judgment creditor’s sole remedy against multi-member LLCs is limited to a charging order. The charging order constitutes a lien upon a judgment debtor’s transferable interest and requires the limited liability company to pay over to the judgment creditor a distribution that would otherwise be paid to the judgment debtor. The debtor’s “transferable interest” represents the debtor’s interest in LLC profits and distributions. Because the charging order is deemed the creditor’s sole remedy the creditor cannot pursue alternate collection tools such as a foreclosure or receivership.
If the LLC has only one member, and the debtor is the sole owner of the single-member LLC, then the statute provides creditors additional remedies provided that the creditor first can establish that a charging order will not likely satisfy the full judgment within a reasonable time. The statute states that the court may order the sale of that interest in the limited liability company pursuant to a foreclosure sale. If the creditor buys the debtor’s 100% membership interest at foreclosure the creditor then can take all LLC assets including LLC bank accounts.
Single member LLCs do not provide asset protection in Florida. Other states, however, protect single member LLCs. These other states provide that the charging order is the exclusive collection remedy against all LLC membership interests including membership of a single member LLC.
For Florida asset protection an LLC should have at least two members. The members need not both be individuals, and the members do not have to have equal membership interests. Certain types of trust and business entities may serve as the second member of a Florida LLC.