Why a Foreign LLC Does Not Protect Florida Residents

A Florida resident who forms an LLC in Wyoming, Nevada, Delaware, or Nevis does not gain additional asset protection from doing so. Federal courts in Florida have located the membership interest where its owner lives and applied Florida’s collection rules to it. Florida’s appellate courts have not decided the question, and other states place the interest where the company was formed.

Four decisions tested the out-of-state LLC strategy, three of them Florida appellate decisions and the fourth a federal one. The one decision that supported it was disapproved in part in 2022. Alper Law was directly involved in one of those cases.

Why Florida Residents Form Out-of-State LLCs

Florida does not provide charging order exclusivity for single-member LLCs. Under § 605.0503(4) of Florida’s Revised LLC Act, a judgment creditor who satisfies the court that a charging order will not clear the judgment within a reasonable time can have a single-member interest sold. The creditor may ask for that sale as soon as it holds the judgment, without first trying a charging order. Whoever buys the interest takes the whole of it and becomes the member, with control of everything the company owns.

Wyoming, Nevada, Delaware, and Nevis all provide charging order exclusivity for single-member LLCs by statute. A creditor in those jurisdictions can receive only a lien on future distributions, not ownership of the LLC itself. This is a meaningful difference, if the LLC’s home-state law actually applies.

Online formation services promote out-of-state formation as the fix for Florida’s single-member vulnerability. The theory is that if the LLC is formed in Wyoming (low fees, strong statute) or Nevis (offshore jurisdiction, no U.S. court access), the LLC’s home-state law will govern creditor remedies. That theory misunderstands how creditor collection works when the debtor lives in Florida.

The Membership Interest Follows the Owner

The federal decisions that have reached the question treat an LLC membership interest as intangible personal property sitting where its owner lives. When a creditor obtains a judgment against a Florida resident and seeks to collect against that person’s LLC interest, the creditor files in Florida. A court that follows those decisions applies Florida law rather than the law of Wyoming, Nevis, or wherever the LLC was organized.

The case that established this principle for foreign LLCs involved a Nevis-organized LLC. In Wells Fargo Bank v. Barber (M.D. Fla. 2015), two banks holding a $62.5 million deficiency judgment sought to foreclose on the debtor’s interest in a single-member Nevis LLC. The debtor argued that Nevis law governed and limited the creditor to a charging order. The court rejected that argument, holding that the membership interest was intangible personal property located in Florida because the owner resided in Florida.

Applying Florida’s creditor remedies under § 608.433(6), the court held that the creditors had stated a claim to foreclose on the single-member LLC interest. Chapter 608 was repealed in 2015, and the foreclosure remedy against a single-member interest now appears at § 605.0503(4). Organizing the entity in a jurisdiction with stronger statutory protections did not keep the claim out of a Florida court. The Nevis LLC Ordinance’s charging order exclusivity, bond requirements, and short statute of limitations were irrelevant because the Florida court never needed to apply Nevis law.

The Barber holding applies equally to domestic out-of-state LLCs. A Florida resident who forms a single-member LLC in Wyoming receives Wyoming’s statutory protections only if a Wyoming court handles the collection proceeding. When the creditor proceeds in Florida, which is where the debtor lives and where collection proceedings are filed, a court that follows Barber applies Florida law.

The Certificated-Interest Workaround

After Barber, practitioners attempted a workaround: convert the LLC membership interest into a certificated security under UCC Article 8, issue a physical certificate, and store it outside Florida. A physical certificate located outside Florida would establish the situs of the interest in the foreign jurisdiction, forcing the creditor to proceed there, or so the theory went.

Under UCC Article 8, a certificated security is transferred by physical delivery of the certificate. If the certificate sits outside Florida, a Florida court may have no in rem jurisdiction over it.

In Schanck v. Gayhart (Fla. 1st DCA 2018), the court rejected this strategy. The debtor had moved stock and LLC membership certificates to Canada. The creditor asked the Florida court to order cancellation of the existing certificates and reissuance of new certificates in Florida. The court held that Florida’s UCC § 678.1121(5) authorizes courts to aid creditors through any means allowed in law or equity, including ordering reissuance. Moving the certificates to a foreign jurisdiction did not prevent the Florida court from acting.

The Schanck decision eliminated the last procedural workaround for establishing foreign situs through certificated interests. Certificates remain useful for tenants by the entirety documentation and internal governance, but they do not create a jurisdictional shield.

Can Florida Courts Compel Action on Foreign Assets?

A Florida court that has personal jurisdiction over the debtor can compel the debtor to act on assets held outside Florida. That rule took eight years to settle. A 2014 decision from Florida’s Fourth District Court of Appeal temporarily supported the foreign-LLC strategy. In Sargeant v. Al-Saleh (Fla. 4th DCA 2014), the court held that it could not order the turnover of stock certificates in a foreign corporation because the court lacked in rem jurisdiction over property located outside Florida.

The Sargeant rule stood alone for four years. In 2018 the First District reached the opposite conclusion in Schanck, holding that personal jurisdiction over the debtor was enough, and the districts split. The Florida Supreme Court took the question up in 2022 on a conflict certified by the Fifth District.

In Shim v. Buechel (Fla. 2022), the debtor held a $4 million negotiable instrument in South Korea. The judgment creditor asked the trial court to compel the debtor to turn over the foreign asset. The trial court denied the motion, citing Sargeant and the lack of in rem jurisdiction over property in a foreign country.

The Fifth District reversed, and the Florida Supreme Court approved its decision. Section 56.29(6) authorizes trial courts to order a debtor to act on property outside the court’s jurisdiction, provided the court has in personam jurisdiction over the debtor. The court disapproved Sargeant to the extent it held otherwise.

The Shim decision completed a sequence that began with Sargeant in 2014. Over those eight years the courts rejected foreign situs, the certificated-interest workaround, and the argument that the entity’s own state law governs collection. Non-exempt property the debtor holds or controls can be reached through the debtor wherever it sits, as long as the Florida court has personal jurisdiction.

Why Specific Jurisdictions Fail

Wyoming. Wyoming’s LLC statute provides charging order exclusivity for single-member LLCs and does not require the creditor to post a bond. These protections apply in Wyoming courts. The federal courts in Florida that reached the question applied Florida’s remedies to a resident’s interest in an LLC formed elsewhere. A Florida LLC and a Wyoming LLC give a Florida resident the same protection under those decisions, because the same Florida creditor remedies apply to both.

Nevada. Nevada’s charging order statute similarly protects single-member LLCs. For Florida residents, the same choice-of-law problem applies. A Nevada LLC introduces an additional risk. Nevada does not recognize tenants by the entirety ownership of LLC interests. Forming outside Florida hands the creditor another forum, and the judge there may decide the question under local law. Iowa’s highest court took that path against a married couple living in Florida, and their entireties claim over an Iowa LLC interest failed.

Nevis. A standalone Nevis LLC has charging order exclusivity, a three-year sunset on charging orders, a creditor bond requirement, a beyond-reasonable-doubt fraudulent transfer standard, and two limitation periods: two years running from the creditor’s claim, one year running from the transfer. None of these protections apply when a Florida court collects against the debtor’s membership interest under Florida law. The Barber case demonstrated this directly. A Nevis LLC has value as a holding entity within a broader offshore trust structure, but it does not protect a Florida resident as a standalone entity.

Delaware. Delaware’s LLC statute provides charging order exclusivity. For asset protection purposes, a Florida resident’s Delaware LLC interest receives the same treatment as any other out-of-state LLC interest.

The Added Cost of an Out-of-State LLC

A Florida resident who forms an LLC outside Florida pays more to maintain the entity without gaining any legal advantage. The out-of-state LLC requires a registered agent in the formation state and annual report filings in both states. If the LLC owns Florida real estate or conducts business here, it must also register as a foreign LLC with the Florida Division of Corporations. That registration carries the same $138.75 annual report fee as a domestic Florida LLC, on top of whatever the formation state charges.

The extra cost buys a structure that a Florida court following the federal decisions treats identically to a domestic LLC for creditor collection purposes. A Florida resident’s LLC asset protection depends on how the entity is structured, not where it was formed.

What Works Instead

The foreign-LLC strategy fails because the debtor remains within the court’s jurisdiction. A Florida court can order a Florida debtor to do abroad what it could have ordered done inside Florida: repatriate assets, sign documents, cancel and reissue certificates, surrender property. A debtor who refuses can be held in contempt.

An offshore trust with an independent foreign trustee changes what such an order can accomplish. A licensed trustee in the Cook Islands holds the assets, so the debtor no longer has the legal power to hand them over. A Florida judge can still order the debtor to try, and contempt is the cost of refusing. The trustee is not a party to the Florida proceeding, is not subject to the Florida court’s authority, and owes no duty to comply with a Florida order.

A foreign LLC leaves the debtor in control of assets that a Florida court can reach through the debtor. In an offshore trust an independent trustee holds the management authority. A Cook Islands court will refuse a U.S. judgment obtained against the settlor, the trustee, or a beneficiary when the judgment turns on law its own trust statute contradicts. A creditor who wants the trust’s assets has to sue again from scratch in a Cook Islands court.

A multi-member Florida LLC provides effective domestic protection without the cost and complexity of an out-of-state formation. Under § 605.0503(3), the charging order is the exclusive remedy against a member’s interest in a multi-member LLC. Adding an irrevocable trust as a second member converts a vulnerable single-member LLC into a protected multi-member structure.