Creditors of a Florida single member LLC (“SMLLC”) are able to reach the assets of SMLLC by obtaining a charging order and then foreclosing on the member’s interest. However, if an LLC has multi-members, creditors are limited to distributions that a debtor member would ordinarily receive from the LLC.
To prevent a foreclosure of a SMLLC interest, an option is to initially form the LLC with a spouse having a member interest. The spouse would be entitled to distributions proportionate to his/her respective interest and the creditor would be limited to those distributions.
Since Florida is a non-community property state, a LLC owned by a husband and wife would then be deemed a partnership for IRS purposed and should file its returns accordingly.
However, each spouse would now be potentially personally liable for various federal and state taxes; along with judgments from creditors. Whereas a SMLLC would limit any personal risk exposure to one spouse, the liability exposure of the other spouse in a multi-member LLC would negate the advantage of forming a LLC to minimize personal liability.
It might be wise to stick with a SMLLC and acquire an umbrella insurance policy to address any unforeseen contingencies.