Limiting the ability for creditors to charging lien to the owner of a Florida LLC is a big concern for many residents. At least two members are required to limit a creditor’s ability to a lien, and adding another member to an LLC can be a tricky process.
In Olmstead vs. Federal Trade Commission, the Supreme Court decided the issue of whether a court could order a judgment-debtor to surrender all “right, title, and interest in the debtor’s single-member limited liability company to satisfy a judgment. The Court ruled courts were allowed to do this and reasoned, “that there is no reasonable basis for inferring that the provision authorizing the use of charging orders under section 608.433(4) establishes the sole remedy for a judgment creditor against a judgment debtor’s interest in single member LLC. This case, and other recent bankruptcy cases, have made it clear that a single member LLC is not as safe from creditors as once believed. The best solution to this issue of potential liability is to form a multiple member LLC.
Generally, there are two ways to add another member to an LLC. The LLC owner can allow a third party to invest money in the LLC in exchange for a minority interest. There is no limitation regarding who can serve as the third party, which means a family member or even a spouse can be a third party. What is important is that the share of the LLC given in consideration for the investment reflects a fair value for what is given. The purchase price must be at or above fair market value.