It’s important that business owners know about the Florida Supreme Court’s recent decision in Olmstead v. FTC and its impact on LLCs organized, operating, or owning property in Florida.  The Olmstead decision eliminates part of the asset protection feature of all single-member LLCs and calls into question the asset protection afforded by multiple-member LLCs.  “[This] decision crushes a very important element for all LLCs in Florida,” wrote Justice Lewis in his dissenting opinion. 

To understand the Olmstead decision, a refresher will be helpful.  Traditionally, LLCs have been the go-to business entity because they combine corporation-style management and limited partnership-style “charging order” protection from owner-related liabilities (for example, a car accident).  With a charging order against a business owner’s interest in an LLC, a judgment creditor in Florida is entitled to receive distributions otherwise payable to the business owner, if any, but the creditor cannot foreclose against and take ownership of the LLC interest, which may include the right to participate in management of the LLC.  In Florida, the charging order was understood to be an absolute shield of the LLC’s business operations and assets, until the Olmstead decision.

In Olmstead, the Florida Supreme Court decided that judgment creditors can foreclose against and take ownership of the owner’s interest in a single-member Florida LLC.  The Court based its decision on the fact that the Florida LLC charging order statute does not expressly state it is the “exclusive remedy.”  The Court’s reasoning in Olmstead is extremely troubling.  Creditors can now argue: if the charging order is not the exclusive remedy for single-member Florida LLCs then it’s not the exclusive remedy for multiple-member LLCs either.  The Olmstead decision suggests that judgment creditors may be granted the right to foreclose against ownership interests in any LLC formed in a non-“exclusive remedy” jurisdiction, like Florida.

Business owners should consider how the Olmstead decision may affect the LLCs they own or do business with.  For this purpose, LLCs can be broken down into 5 categories.  Our Post-Olmstead LLC Action Guide examines the risk to each LLC category and offers general recommendations.   

Please contact us if you have any questions regarding Olmstead and what actions you should now take.