Olmstead v. FTC: The Case That Ended Single-Member LLC Protection in Florida

A single-member LLC in Florida does not protect its owner’s assets from a personal creditor. That result traces directly to the Florida Supreme Court’s 2010 decision in Olmstead v. FTC, 44 So. 3d 76 (Fla. 2010), which held that a court can order a judgment debtor to surrender all right, title, and interest in a single-member LLC to satisfy a judgment.

Before Olmstead, practitioners assumed that a charging order—a lien limited to LLC distributions—was the only remedy available against any LLC member’s interest. The decision eliminated that assumption for single-member LLCs and forced the Florida Legislature to rewrite the LLC statute.

The Facts

Shaun Olmstead and Julie Connell ran a prepaid credit card scam that defrauded roughly 200,000 consumers. The Federal Trade Commission sued them in the U.S. District Court for the Middle District of Florida for deceptive and unfair trade practices. The court froze their assets, placed them in receivership, and entered a judgment for more than $10 million in restitution.

The defendants’ assets included several Florida single-member LLCs. To partially satisfy the judgment, the FTC obtained an order compelling Olmstead and Connell to surrender all right, title, and interest in their LLCs to the receiver. The defendants appealed to the Eleventh Circuit, arguing that Florida’s LLC Act limited the FTC to a charging order.

The Eleventh Circuit found no controlling Florida precedent and certified the question to the Florida Supreme Court.

The Certified Question

The Eleventh Circuit asked whether, under Florida Statutes § 608.433(4), a court could order a judgment debtor to surrender all interests in a single-member LLC to satisfy a judgment.

The Florida Supreme Court accepted the question but rephrased it. The original question asked what § 608.433(4) permitted. The rephrased question asked what “Florida law” permitted. That change was significant. It allowed the majority to look beyond the charging order statute itself and consider other creditor remedies available under Florida law, including levy and execution under § 56.061.

The Majority Opinion

The Florida Supreme Court, in a 5-2 decision, held that the charging order was not the exclusive remedy for creditors of single-member LLC owners. The opinion rested on a textual comparison between Florida’s LLC statute and its partnership statutes.

Florida’s Revised Uniform Partnership Act and Revised Uniform Limited Partnership Act both made the charging order the “sole and exclusive remedy” for a judgment creditor of a partner. The LLC Act’s charging order provision in § 608.433(4) contained no such language. It stated only that a court “may charge” a member’s interest with payment of a judgment. The majority treated the omission as deliberate, concluding that the legislature intended charging orders for LLCs to be different from charging orders for partnerships.

The majority then analogized an LLC membership interest to corporate stock. The opinion called an LLC “a type of corporate entity” and treated membership interests as equivalent to shares of stock. Because corporate stock is subject to levy and execution, the majority concluded that LLC interests should be as well.

Both of these analytical moves drew sharp criticism. The corporate analogy was wrong on its face. An LLC is a hybrid entity derived primarily from partnership law, not corporate law. Membership interests carry management rights, allocation rights, and distribution rights that have no analogue in corporate stock. The “absence of exclusive language” argument was weaker than it appeared: the LLC Act was drafted separately from the partnership statutes, and the omission had no documented legislative history supporting the majority’s inference.

The Dissent

Justice Lewis authored a detailed dissent joined by Justice Quince. The dissent argued that the majority misread the statute and created consequences that extended far beyond single-member LLCs.

The dissent’s core argument was structural. Section 608.433(4) was modeled on the Uniform Limited Liability Company Act. That model act treated the charging order as the exclusive remedy without using the word “exclusive.” The absence of that word reflected drafting convention, not legislative intent to weaken the remedy for LLC members.

The dissent also warned that the majority’s reasoning had no logical stopping point. The statute drew no distinction between single-member and multi-member LLCs. If the charging order was not the exclusive remedy for single-member LLCs, the same logic applied to multi-member LLCs. A creditor of one member in a ten-member LLC could potentially force surrender of that member’s interest, disrupting the business and harming nine innocent co-members. The dissent’s warning proved prescient. The legislature moved to close exactly this exposure within a year.

The Legislative Response

The Florida Legislature passed the Olmstead Patch on April 29, 2011—the last business day of the legislative session. The vote was 112-1 in the House and 39-0 in the Senate. The governor signed it on May 31, 2011, with retroactive application.

The 2011 amendment added exclusive-remedy language that the original LLC statute had lacked. For multi-member LLCs, the charging order became the sole and exclusive remedy. For single-member LLCs, the amendment preserved the creditor’s ability to seek foreclosure, but only if the creditor could show that a charging order alone would not satisfy the judgment within a reasonable time.

The 2014 Florida Revised LLC Act replaced Chapter 608 entirely with Chapter 605. Section 605.0503 codified the post-Olmstead framework in permanent form and now governs all LLC creditor remedies in Florida.

Single-Member vs. Multi-Member LLCs Under Current Law

Florida Statutes § 605.0503(3) makes the charging order the sole and exclusive remedy by which a creditor can satisfy a judgment from a member’s interest in a multi-member LLC. The creditor cannot foreclose on the interest, compel dissolution, acquire management rights, or participate in LLC governance. The charging order creates a lien on distributions only.

Section 605.0503(4) provides a different rule for single-member LLCs. If a court determines that distributions under a charging order will not satisfy the judgment within a reasonable time, the court may order foreclosure of the membership interest. At a foreclosure sale, the purchaser acquires the debtor’s entire interest, becomes the sole member, and gains full management control of the LLC and its assets.

The distinction is binary. A multi-member LLC with a properly drafted operating agreement and a manager exercising discretion over distributions can make a charging order functionally worthless to the creditor. A single-member LLC cannot, because foreclosure gives the creditor everything the debtor had.

What Olmstead Means for LLC Planning

The practical consequence of Olmstead and the current statute is that every LLC intended for asset protection in Florida needs at least two bona fide members. Adding a nominal 1% member does not satisfy the requirement. The second member must have genuine economic rights, documented in the operating agreement, with real capital contributions or legitimate business purposes.

One common strategy is adding an irrevocable trust as the second member. Under § 605.0503(3), the presence of a second member invokes the exclusive-remedy framework. The trust holds a minority interest, the original owner retains management control through the operating agreement, and the charging order becomes the creditor’s only path.

The operating agreement matters independently of the membership count. An agreement that imposes affirmative obligations on members—capital call requirements, management participation duties, supermajority approval for major decisions—strengthens the argument that the agreement is an executory contract a bankruptcy trustee must respect.

Forming a single-member LLC in Wyoming, Nevada, or another state with stronger charging order protections does not solve the problem for Florida residents. An LLC membership interest is intangible personal property that follows the owner. When a Florida creditor sues a Florida resident, the court applies Florida law to the membership interest regardless of where the LLC was organized. The foreign-LLC choice-of-law analysis, confirmed in Wells Fargo Bank v. Barber (M.D. Fla. 2015), forecloses this workaround entirely.

When a multi-member LLC is insufficient, or when the creditor threat is too aggressive for a charging order to deter, the analysis moves to offshore trusts with independent foreign trustees outside U.S. court jurisdiction.