Limited Liability Companies in Florida (LLCs)
What is a Limited Liability Company (LLC)?
LLCs were first created in Wyoming in 1977 and are now in all states.
It operates like a partnership but has the liability protection of a corporation. The partners are called members.
The managing member runs operations. Or you can have a manager who is not a member, and their name will be on the Florida Secretary of State's web site not the members.
Registered agent is the person who legal papers served on the LLC. That person should be regularly available at the registered office of the company.
It should have articles of organization, an operating agreement and a management agreement.
The Florida Statute is Section 608, the Florida Limited Liability Company Act. Also see Section 621, the Professional Service Corporation and Limited Liability Company Act.
LLCs are similar to S corporations. S corps do not pay taxes, the shareholders do. C corps do pay taxes.
LLC owners can be other corporations or trusts but corporation owners can not be. They have to be natural persons.
There may be some tax disadvantages for the small LLC as all earned income may be treated as being subject to the self employment tax.
In Florida it also has to pay unemployment contributions.
An LLC has a credit rating separate to the owner, so it can go bankrupt without affecting the members' rating.
Asset Protection and LLCs
If an LLC is liable, then only to the extent of the assets that it owns. The members assets are not accessible.
Under the FL LLC law, a personal liability, such as an auto accident, the creditor cannot get access to the assets in the LLC.
The creditor can only get a "charging order" against your assets in the LLC. The only thing the creditor can do is pay the taxes on your share of the LLC profits.
So getting a charging order hurts them. They would prefer to settle for a fraction of the debt instead.
So, put as many of your assets in the LLC as possible.
The rationale for this is that a multiple member LLC would be disrupted by an attempt to liquidate or take the LLC's assets because of a debt of a single member. But one court has ruled that a single member LLC does not need that double protection. So always have a multiple member LLC in order to retain this protection.
The other member could be another LLC, or trust. But if it appears like one person controls everything, the court may rule against you.
Single member LLC and real estate
A single member LLC would be fine if it did not have any assets, e.g. it was only used for property management, with rent coming in and then being disbursed to the owner.
Each home could be owned by a single member LLC, which is owned by a multiple member LLC. The protection could pass from the multiple member LLC through to the single member LLCs.
Single member is easier for tax purposes as no return is needed. The member has a return.
A multiple member LLC has to file a 1065 so it can be an income pass thru entity for its members, a partnership return and give each member a K-1.
Foreign LLCs
Foreign means set up in another state such as DE, NV or WY.
The disadvantage is needing a registered office in those states, and also having to register as a foreign LLC in FL. You may have to pay income tax there if they have one.
Florida Limited Liability Company (LLC) continued
