Charging Order and LLC Case Law in Florida

Florida’s charging order case law defines who can reach LLC assets and under what conditions. A charging order—the creditor’s only remedy against a multi-member LLC member’s interest—limits collection to distributions the LLC actually pays. The creditor gets no management rights, no ownership, and no ability to force a distribution.

That protection exists because of, and within the boundaries drawn by, the cases discussed here. Olmstead v. FTC stripped single-member LLCs of charging order protection. Wells Fargo Bank v. Barber closed the foreign-LLC workaround. Alper Law served as co-counsel in one of these cases, Schanck v. Gayhart.

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. Shaun Olmstead 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. The Court disagreed. The Florida partnership and limited partnership statutes both included explicit “sole and exclusive remedy” language, but the LLC statute did not. That omission was deliberate: a creditor could use other remedies, including levy and execution, to reach a single-member LLC interest.

The Court’s reasoning turned on 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.

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 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 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 rules in § 605.0503. For multi-member LLCs, § 605.0503(3) makes the charging order the sole and exclusive remedy. A creditor cannot foreclose on the interest, compel dissolution, or 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 also resolved the multi-member question that Olmstead had left uncertain. The Olmstead opinion focused on single-member LLCs, but its reasoning—the absence of exclusive-remedy language—applied equally to 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)

The federal court’s decision in Wells Fargo Bank v. Barber (M.D. Fla. 2015) produced three holdings that reshaped foreign LLC planning in Florida. Sabrina Barber faced a $62.5 million deficiency judgment. The debtor had transferred substantially all assets to a sole-member Nevis LLC after summary judgment was entered.

The court held that an LLC membership interest is intangible personal property that follows the owner. Because the debtor was a Florida resident, Florida law governed the creditor’s remedies, not Nevis law. This principle destroyed the foreign-LLC strategy: forming a single-member LLC in Wyoming, Nevada, Nevis, or any other charging-order-exclusive jurisdiction does not protect a Florida resident, because Florida courts will apply Florida law to the membership interest.

The court also ordered foreclosure of the membership interest and found sufficient badges of fraud: the transfer occurred after an adverse judgment, the debtor transferred substantially all assets, retained beneficial use, and controlled the receiving entity.

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. 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.

The Albright decision is a Colorado bankruptcy ruling and does not bind Florida courts. But the Florida Supreme Court in Olmstead adopted the same policy reasoning: charging order protection exists to protect innocent co-members, not to create an asset protection vehicle for sole owners.

In re Ehmann (Bankr. D. Ariz. 2005)

The bankruptcy court’s decision in In re Ehmann, 319 B.R. 200 (Bankr. D. Ariz. 2005), exposed 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 treat it as a non-executory contract and bypass its restrictions entirely.

An executory contract is one where both sides still have material obligations to perform. In Ehmann, the debtor was a non-managing member of a family LLC whose only obligation was not to voluntarily withdraw—an option, not an affirmative duty. The court concluded the operating agreement imposed no meaningful obligations on members, so it was not executory. The trustee acquired all of the debtor’s rights and interests, including management rights the operating agreement purported to restrict.

The practical lesson for LLC planning in Florida: an operating agreement designed for asset protection must include genuine, ongoing bilateral obligations for each member. Capital contribution requirements, fiduciary duties, consent rights for major decisions, and supermajority voting requirements all strengthen the executory contract argument. A bare-bones agreement that merely documents ownership percentages provides weaker protection than one that requires active participation. Manager-managed LLCs with member-approval requirements for major transactions present stronger executory arguments than member-managed LLCs with passive members.

Regions Bank v. MDG Lake Trafford (M.D. Fla. 2023)

The 2023 federal court decision in Regions Bank v. MDG Lake Trafford, LLC (M.D. Fla. 2023) clarified that the charging order is not the exclusive remedy in every situation involving a multi-member LLC. When a creditor alleges fraudulent transfers within the LLC itself, the creditor can pursue remedies under Florida’s Uniform Voidable Transactions Act (FUVTA) 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 a creditor who alleges the debtor used the LLC to effect a fraudulent transfer can seek to set aside the transfer under FUVTA, which may allow the creditor to reach assets inside the LLC directly.

In Regions Bank, the debtor was a real estate developer who transferred assets to multiple entities and trusts while facing over $14 million in debts. The court found sufficient evidence of actual fraudulent intent, including transfers made while the debtor was aware of impending insolvency.

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 move assets away from an existing creditor may lose its charging order protection entirely.

Why Foreign LLCs Do Not Protect Florida Residents

The Barber decision established the principle, and the implications extend to every foreign-organized LLC. 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 formed in Nevis and similar jurisdictions.

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.