As we discussed in our last newsletter, on May 3, 2013, the Florida legislature passed the new Florida Revised Limited Liability Company (“LLC”) Act. This new LLC act will apply to all Florida LLCs by January 1, 2015. In our last newsletter, we explained some of the important changes LLC owners will face under the new LLC act. This newsletter will address some aspects of Florida LLC law which have not changed and therefore will continue to have a substantial effect on your business.
One unchanged provision of Florida LLC law that every current or potential LLC owner should be aware of involves creditor protection. If you are the owner of a single-member LLC (you are the sole owner and the only person listed on the LLC documents), did you know that your personal creditors might be able to take your LLC’s assets? Were you aware that the same LLC assets should be protected from the same creditors if your LLC had more than one member?
If you owe someone money for personal reasons (i.e. for your mortgage) rather than for business reasons (i.e. for rental of office space), Florida LLC law may block that creditor from reaching money, property, and other assets belonging to your LLC. The amount of protection offered under these circumstances depends on whether your LLC has one member or more than one member. As is mentioned above, the personal creditor of the owner of a single-member LLC may be able to collect what is owed him from the LLC’s assets. However, when the personal creditor of one member of a multi-member LLC comes calling, Florida law says that he cannot directly reach the assets of the LLC. The creditor instead will be limited to obtaining a “charging order” directing the LLC’s manager to pay him any income or profits that would otherwise be distributed to the member that owes him money. This provides significant protection for the multi-member LLC because the creditor generally will not be able to force the manager to make distributions.
Another notable provision of Florida LLC law that remains on the books is Section 608.4225 of the Florida Statutes. This provision places anyone who manages an LLC under a duty of care and a duty of loyalty to the LLC. These are serious standards of conduct which, if violated, can result in personal liability for the manager or managing member.
If you are a business owner, hopefully you now understand the importance of staying abreast of Florida law as it relates to your business. We would welcome the opportunity to talk to you about keeping your LLC current.