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How to Use an LLC for Asset Protection in Florida

Did you know you can use an LLC for asset protection in Florida? In such a litigious society, your personal assets and interests are always at risk. But by structuring your assets in a Limited Liability Company, you can shield them from disputes, creditors and accidents.

In today’s world, it’s easy to sue someone without paying money out of pocket. Customers, lenders or suppliers are all potential threats to your assets or business interest. But by using an LLC, a lawsuit won’t threaten you as an individual or your personal assets.

In this guide, we’ll introduce how you can use an LLC for asset protection in Florida. We also welcome you to contact our Florida business attorneys for a free consultation today. We do not advise you to form an LLC without a lawyer’s support.

What is a Limited Liability Company in Florida?

  • A Limited Liability Company in Florida is a type of business entity that protects its owners from personal responsibility for liability and debt. It offers further flexibility than filing as a corporation.
  • LLCs can be thought of as combining the characteristics of a corporation and a sole proprietorship or partnership.
  • LLCs limit the liability of managers and managing members but can also use operating agreements for obligations, voting powers, structures, distribution rights, organizational changes and more.
  • LLCs also don’t require the regular formalities of a corporation and do not pay tax themselves.

Read Related: Do I Need a Lawyer to Start a Business?

Using an LLC for Asset Protection in Florida

Protect Your Personal Assets

An LLC can be used as an asset protection tool if a business owner transfers assets from their name into the name of the LLC.

Once that’s completed, the Limited Liability Company now legally owns the asset – not the person in charge. So, if as a business owner you face a lawsuit, it will be the LLC that incurs the liability, not yourself. This creates a clear division between LLC-owned assets and personally owned assets. These assets are also safe from creditors.

LLCs and Charging Orders

In Florida, an LLC membership interest is not considered an exempt asset. But, the good news is that creditors have a limited ability to collect from a debtor’s LLC interest.

That’s because Florida law provides a judgment restricting creditors from seizing or garnishing LLC ownership interests. A creditor cannot attack assets, real estate or any financial accounts owned by the Limited Liability Company. If the operating agreement is well drafted, the creditor will also be unable to inspect the LLC’s financial records.

Thanks to Florida law, a judgment creditor can only use a charging lien or charging order. According to Florida Statute 605.0503, the charging order is the only remedy a creditor can use against a judgment debtor’s LLC membership interest.

Charging orders give the creditor a lien against any cash or other property distributions made or owed by the LLC.

If an LLC doesn’t distribute money, the creditor cannot receive anything. Why? Because undistributed assets and cash flow remain secure inside the LLC.

Easy and Inexpensive

LLCs are also considered less expensive than trusts to form and maintain. An LLC can be filed by preparing ‘Articles of Organization’ and then by paying the filing fee.

Enhanced Protection

LLCs can also restrict a creditor’s options in the event of a lawsuit or legal judgment. With a well-drafted Operating Agreement, ‘creditor protection’ provisions can be included. Provisions can extend greater protection. To learn more, contact our Florida business attorneys.

Pass-Through Tax Treatments

Corporations usually leave you facing double income taxation. Both the corporation’s profits and shareholders will be forced to pay income tax.

With an Limited Liability Company, you can benefit from ‘pass through’ tax treatments. This system allows allocated profits to be taxed just once on your individual income tax return.

Estate Planning with an LLC

Placing assets in an LLC can also be very useful for estate planning. For example, if you’re worried about estate taxes and gift taxes when leaving assets for your children, then LLC can help you significantly soften the blow.

Heirs can become shareholders, allowing them to benefit from the LLC’s assets. LLCs also shield assets from creditors that are usually hungry for assets if you pass away with outstanding debts.

How to Form an LLC

Forming an LLC is a complex process, full of ways to make mistakes. We advise that you don’t try to set up an LLC alone. Work with an experienced and reputable business attorney such as those at Battaglia, Ross, Dicus & McQuaid, P.A. Any mistakes could open doors to liability, and IRS violations. A business lawyer will also be able to optimize every part of the filing and structuring of your LLC, so you reap the benefits.

However, for introductory purposes, the initial steps include:

  • First, you need to prepare and file an application with the Florida Secretary of State.
  • Search on the Secretary of State’s website to ensure your proposed LLC name has not already been taken.
  • Then, you must file an ‘Article of Organization’, outlining the rules of your LLC and;
  • Designate a registered agent of the LLC who will be authorized to receive complaints from a plaintiff.
  • List the name of the LLC’s manager.
  • Once the Secretary of State accepts the Article of Organization and the filing fee has been paid then,
  • Form an ‘Operating Agreement for the LLC, which details the financial and legal agreements of the LLC’s members (such as initial capital contributions and each individual’s share of profits and losses)
  • All LLCs in Florida must obtain an Employer Identification Number (EIN), while also keeping accurate annual reports. You may also need to acquire further business licensing requirements.

Single Member LLCs Don’t Protect Assets.

As of 2011, Florida’s LLC single-member laws have no longer allowed single-member LLCs to benefit from the same asset protection as multi-member LLCs. Creditors can therefore attack the debtor’s interest in single-member LLCs.

However, by using a multi-member LLC, you can prevent creditors from foreclosing on a debtor’s interest due to charging orders.

Please contact our Florida business attorneys for further information.

Contact a Business Attorney in Florida

Contact our Florida business attorneys if you want to use an LLC for asset protection in Florida.

Our team regularly helps businesses of all sizes, from small LLCs to large corporations, to maintain a solid and optimal legal standing.

Free Consultations

U.S. News and World ReportsTier 1 Law Firm, Battaglia, Ross, Dicus & McQuaid, P.A., has extensive experience in the business world, We welcome you to contact us with a free consultation.

CALL (727) 381-2300 today for a free case review.


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