Evaluating the Latest Developments in the World of Single-Member LLCs

Special regard may need to be given in Florida to single-member LLCs. Consumers and practitioners must now deal with the fact that with the Florida Supreme Court's decision in Olmstead v. FTC, 2010 Fla. LEXIS 990 (June 24, 2010), courts are permitted to order a judgment debtor to surrender all right, title, and interest in the debtor's single-member limited liability company to satisfy an outstanding judgment, notwithstanding F.S. § 608.433(4)(LLCs). 

Language in the Olmstead decision suggests that the Florida Supreme Court finds that Section 56.061 and references to "stock in corporations" are to include as an "ownership interest in an LLC" under this standard.  The Florida Supreme Court found it further significant that when enacting changes to the limited partnership statute, inserting "exclusive remedy" language into the provisions governing creditor's rights with regard to those interests, the Legislature did not make changes to the Florida LLC Act.  As the Florida Supreme Court noted, "(o)n its face, the charging order provision establishes a nonexclusive remedial mechanism.  There is no express provision in the statutory text providing that the charging order remedy is the only remedy that can be utilized with respect to a judgment debtor's membership interest in an LLC.  The operative language of Section 608.433(4)--'the court may charge the (LLC) membership interest of the member with payment of the unsatisfied amount of the judgment wit interest'--does not in any way suggest that the charging order is an exclusive remedy.  In this regard, the charging order provision in the LLC Act stands in stark contrast to the charging order provisions in both the Florida Revised Uniform Partnership Act, Sections 620.81001-9902, F.S. (2008) and the Florida Revised Uniform Limited Partnership Act, Sections 620.1101-2205, F.S. (2008).  Although the cord language of the charging order provisions in each of the three statutes is strikingly similar, the absence of an exclusive remedy provision sets the LLC Act apart from the other two statutes.  With respect to partnership interests, the charging order remedy is established in section 620.8504, ....with respect to limited partnership interests, the charging order reemdy is established in 620.1703,...The Legislature has shown--in both the partnership statute and the limited partnership statute--that it knows how to make clear that a charging order remedy is an exclusive remedy.  The existence of an express exclusive-remedy provision in the partnership and limited partnership statutes therefore decisively undermines the appellants' argument that the charging order provision of the LLC Act--which does not contain such an exclusive remedy provision--should be read to displace the remedy available under section 56.061."  at 15-16. 

This decision essentially empowers judgment creditors in Florida to pursue a debtor's interests in any single-member LLC, relying on the general interests on execution and levy of corporate interests found in F.S. Sec. 56.061.  It remains to be seen what kind of ramifications can be drawn from the decision as to multi-member LLCs in the state, or how (if) the Legislature will taken any action.

If you are an owner of a closely-held business entity and want to know more about piercing of the veil and charging order liens, please contact us.
 
If you have concerns or questions about any of these alternative legal theories and wish to consult with the Tufts Law Firm, please contact us.

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