Charging Order and LLC Case Law in Florida

A single Florida Supreme Court decision in 2010 reshaped LLC creditor protection statewide. The legislature patched the statute in 2011, and Chapter 605 replaced Chapter 608 entirely in 2014. The cases below trace that sequence and define the current rules: what a charging order actually limits a creditor to, why single-member LLCs lost their protection, and what happens when a Florida resident forms an LLC elsewhere.

Two of the cases discussed here involve the firm directly. The Wells Fargo Bank v. Barber decision, involving Alper Law client Sabrina Barber, established that LLC membership interests are intangible personal property following the owner. The Schanck v. Gayhart decision, where the firm served as co-counsel, killed the certificated-interest workaround that practitioners had developed in response to Barber.

Olmstead v. FTC (Fla. 2010)

The Florida Supreme Court’s decision in Olmstead v. FTC, 44 So. 3d 76 (Fla. 2010), eliminated charging order protection for single-member LLCs in Florida. The case involved Shaun Olmstead, who operated a credit card scam through several single-member Florida LLCs. The FTC obtained a $10 million judgment and an order compelling Olmstead to surrender all right, title, and interest in his LLCs.

Olmstead argued that the charging order under former § 608.433(4) was the only remedy available to the FTC. The Court disagreed. It held that the Florida LLC Act did not make the charging order an exclusive remedy. The Court pointed to a deliberate contrast: the Florida partnership and limited partnership statutes both included explicit “sole and exclusive remedy” language, but the LLC statute did not. The absence was not an oversight. It meant a creditor could use other remedies, including levy and execution, to reach a single-member LLC interest.

The Court’s reasoning was tied to the purpose behind charging order protection. The charging order exists to prevent one member’s creditors from disrupting a business that innocent co-members depend on. When there is only one member, there are no innocent co-members to protect. The policy justification disappears, and the remedy limitation disappears with it.

Olmstead* sent shockwaves through asset protection practice in Florida. Before the decision, practitioners routinely recommended single-member LLCs for real estate, investment accounts, and business operations. After *Olmstead*, every single-member LLC in Florida was vulnerable to full execution by a judgment creditor.

The Olmstead Patch (2011) and the Revised LLC Act (2014)

The Florida Legislature responded to Olmstead within a year. The 2011 amendment, known as the Olmstead Patch, added language to the LLC statute making the charging order the sole and exclusive remedy for creditors of a multi-member LLC member. For single-member LLCs, the amendment preserved the creditor’s ability to seek foreclosure, but only if the creditor demonstrated that a charging order alone would not satisfy the judgment within a reasonable time.

The 2014 Revised LLC Act (Chapter 605) replaced Chapter 608 entirely and codified the post-Olmstead framework in § 605.0503. The statute now draws a clear line. For multi-member LLCs, § 605.0503(3) makes the charging order the sole and exclusive remedy. A creditor cannot foreclose on the interest, cannot compel dissolution, and cannot acquire management rights. For single-member LLCs, § 605.0503(4) allows the court to order foreclosure if distributions under a charging order will not satisfy the judgment in a reasonable time. The purchaser at a foreclosure sale becomes the sole member and acquires full control.

The legislative fix resolved the multi-member question that Olmstead had left uncertain. The Olmstead opinion focused on single-member LLCs, but its reasoning could have reached multi-member LLCs as well. The Court relied on the absence of exclusive-remedy language in the LLC statute, and that language was equally absent for multi-member entities. The dissent warned of exactly this outcome. The 2011 amendment foreclosed that argument by adding the exclusive-remedy language the original statute lacked.

Wells Fargo Bank v. Barber (M.D. Fla. 2015)

Sabrina Barber was an Alper Law client whose case, Wells Fargo Bank v. Barber (M.D. Fla. 2015), produced three holdings with lasting consequences for LLC asset protection in Florida.

The debtor had transferred substantially all assets to a sole-member Nevis LLC after a summary judgment was entered against him on a $62.5 million deficiency. The creditor sought to foreclose on the LLC membership interest and asserted fraudulent transfer claims.

The court’s first holding addressed choice of law. The debtor argued that Nevis LLC law governed the creditor’s remedies, and Nevis law limited creditors to a charging order as the exclusive remedy regardless of membership count. The court rejected this argument. It held that an LLC membership interest is intangible personal property, and under conflict-of-law principles, intangible personal property follows the owner. Because the debtor was a Florida resident, Florida law governed the creditor’s remedies against the membership interest, not Nevis law.

The second holding applied the single-member foreclosure remedy. Because the debtor was the sole member and Florida law applied, the court ordered foreclosure of the membership interest under former § 608.433(6). The creditor acquired the debtor’s entire interest in the Nevis LLC.

The third holding addressed the fraudulent transfer claims. The court found sufficient badges of fraud: the transfer occurred after an adverse judgment, the debtor transferred substantially all assets, the debtor retained beneficial use, and the receiving entity was under the debtor’s control.

The critical implication extends beyond the facts of the case. If an LLC membership interest is intangible personal property that follows the owner, then forming a single-member LLC in Wyoming, Nevada, Nevis, or any other charging-order-exclusive jurisdiction does not protect a Florida resident. Florida courts will apply Florida law because the interest is located wherever the owner is located.

The only way to move assets beyond Florida’s enforcement framework is to place them under the control of an independent trustee outside U.S. jurisdiction, which is what a properly structured offshore trust accomplishes.

In re Ashley Albright (Bankr. D. Colo. 2003)

The bankruptcy court’s decision in In re Ashley Albright, 291 B.R. 538 (Bankr. D. Colo. 2003), was one of the earliest cases to undermine single-member LLC protection, predating Olmstead by seven years. The bankruptcy trustee sought to exercise management control over the debtor’s single-member LLC and liquidate its assets.

The court allowed it. It concluded that charging order protection exists to protect co-members from disruption by one member’s creditors. When there is only one member, that rationale does not apply. The trustee stepped into the debtor’s shoes as the sole member, exercised management control, and liquidated the LLC’s assets to satisfy creditor claims.

Although Albright is a Colorado bankruptcy decision and does not bind Florida courts, it influenced the development of the law nationally. The Florida Supreme Court in Olmstead cited the same policy reasoning that Albright had articulated three years earlier: charging order protection exists to protect innocent co-members, not to create an asset protection tool for sole owners.

In re Ehmann (Bankr.)

The bankruptcy court’s decision in In re Ehmann addressed a different vulnerability: the operating agreement itself. The court held that if an LLC’s operating agreement does not impose affirmative obligations on the members, a bankruptcy trustee can abandon it as a non-executory contract.

An executory contract is one where both sides still have material obligations to perform. If the operating agreement requires members to make capital contributions, participate in management, fulfill fiduciary duties, or respond to capital calls, it is executory and the trustee must either assume or reject it. If the agreement merely allocates profits and losses without imposing affirmative duties, the trustee can discard it and reach the LLC assets directly.

The practical lesson is that an operating agreement designed for asset protection must include genuine, ongoing obligations for each member. A bare-bones agreement that exists only to document ownership percentages provides weaker protection than an agreement that requires active participation. Manager-managed LLCs where member approval by supermajority is required for major decisions present stronger executory arguments than member-managed LLCs with passive members.

Regions Bank v. MDG Lake Trafford (Fla. DCA 2023)

The 2023 appellate decision in Regions Bank v. MDG Lake Trafford clarified that the charging order is not the exclusive remedy in every situation involving a multi-member LLC. The court held that when fraudulent transfers are alleged within the LLC itself, the creditor can pursue FUFTA remedies that go beyond the charging order.

Section 605.0503(3) makes the charging order the exclusive remedy for collecting on personal debts owed by an LLC member. But when a creditor alleges the debtor used the LLC to effect a fraudulent transfer, the creditor can seek to set aside the transfer under Florida’s FUVTA, which may allow the creditor to reach assets inside the LLC directly.

The case reinforces a principle that runs throughout Florida LLC law: charging order protection works against creditors pursuing personal debts, not against creditors challenging the legitimacy of the LLC structure itself. An LLC that was used to hide assets from an existing creditor may lose its charging order protection entirely.

Choice of Law: Why Foreign LLCs Do Not Protect Florida Residents

The Barber decision established the principle, but the implications are worth stating directly. A Florida resident who forms a single-member LLC in Wyoming, Nevada, Delaware, or any other state does not receive that state’s charging order protections in Florida litigation.

Wyoming’s LLC statute makes the charging order the exclusive remedy for all LLCs, including single-member LLCs. Nevada’s statute is similar. But when a Florida creditor sues a Florida resident and seeks to reach the debtor’s LLC interest, the court applies Florida law because the membership interest, as intangible personal property, is located with the Florida-resident owner. The foreign state’s charging order statute never enters the analysis.

The same principle applies to offshore LLCs. A Nevis LLC’s statute limits creditors to a charging order and imposes a three-year time limit, a bond requirement, and a beyond-reasonable-doubt burden of proof. None of these protections apply in a Florida courtroom against a Florida resident. The Nevis statute protects the LLC’s assets within Nevis, but it does not prevent a Florida court from ordering the Florida resident to surrender the membership interest.

The only structure that places assets beyond a Florida court’s effective enforcement power is an offshore trust with an independent foreign trustee. The trustee is not subject to Florida jurisdiction and cannot be compelled to comply with a Florida court order. The trust, not the debtor, holds legal title to the assets. This is the structural answer to the problem that Barber, Schanck v. Gayhart, and Shim v. Buechel collectively define.