Florida Single-Member LLC
What is a Florida Single-Member LLC?
A Florida single-member LLC is a limited liability company in which sole ownership of the company is vested in one individual or entity. There are no additional members.
How to Form an FL Single-Member LLC
A Florida single-member LLC is not formed any differently than a multi-member LLC. You form an LLC by filing Florida LLC Articles of Organization with the Division of Corporations and paying the appropriate fee.
A single-member LLC can be formed online, by mail, fax or in-person.
Dangers of a Florida SMLLC
Obviously, the major difference with a single-member LLC is that there is only one member. But this distinction has created a serious consequence for Florida business owners.
The primary protection offered by the LLC entity structure is that it provides limited liability protection for members. In other words, the entity shields members from creditors in various ways.
For example, if a member of a Florida LLC is sued and a creditor seeks payment for debts, the assets of the LLC cannot be seized in order to pay for the debt (because these assets belong, in part, to other members). As well, should the LLC itself be sued, a creditor cannot seize the houses of LLC members as a means of paying the debt.
In these cases, creditors are generally held to using what are called charging orders to remedy debt collection. A charging order limits the means by which debt can be collected.
Unfortunately, a 2010 Florida Supreme Court case (Olmstead v. Federal Trade Commission) found that the charging order limitation did not apply to single-member LLCs in Florida.
This means that any Florida single-member LLC is not treated by the court system like other LLCs, but instead like a sole proprietorship.
In a worst-case scenario, a creditor seeking repayment from a single-member LLC in Florida could seize control of the company, redirect distributions and liquidate assets until the debt is paid.
Solutions to Florida Law
The most obvious solution to this potentially damaging issue is to simply allocate partial ownership to another individual, in which case your company is no longer a single-member LLC. Even a minor ownership percentage, say five percent, is enough to avoid the issue entirely.
Another potential route would be to form a single-member LLC in a state where the charging order protection has been consistently upheld, such as Wyoming. This out-of-state LLC could then be listed as the sole owner of your Florida SMLLC. This route is more costly, and requires that you carefully abide by the compliance standards of more than one state, but it is feasible.