Compare and Contrast: Michigan LLC Laws vs. Florida LLC Laws

I have previously discussed in several blogs the powerful asset protection benefits of the current Michigan law which provides that a charging order is the exclusive remedy for judgment creditors of LLC members, even in cases where the LLC has only one member. In 2011, the Florida Legislature amended the Florida LLC Act and enacted legislation intended to address concerns over the Olmstead case, in which a judgment creditor was allowed to execute against a Member’s interest in a single member LLC. So the simple question is this: Does the new Florida law provide the same protections as those offered in Michigan?

At first glance it appears that the Florida legislation offers significant protections to LLC Members by providing that a charging order is the exclusive remedy available to a judgment creditor (see Florida Statute 608.433). However, the statute goes on to carve out a specific exception for a single member LLC which states that:

“In the case of a limited liability company having only one member, if a judgment creditor of a member or member’s assignee establishes to the satisfaction of a court of competent jurisdiction that distributions under a charging order will not satisfy the judgment within a reasonable time, a charging order is not the sole and exclusive remedy by which the judgment creditor may satisfy the judgment against a judgment debtor who is the sole member of a limited liability company or the assignee of the sole member, and upon such showing, the court may order the sale of that interest in the limited liability company pursuant to a foreclosure sale.”

In effect, this exception negates any protection for the owner of a single member LLC by allowing the judgment creditor to force a sale of the member’s interest in the LLC. The statute also explicitly states that “the purchaser at the court-ordered foreclosure sale obtains the member’s entire limited liability company interest, not merely the rights of an assignee.”

If you contrast the Florida law with the law currently in effect in Michigan, you will find that the Michigan Limited Liability Company Act does not draw any distinction between the protections offered to a member of a single member LLC or the members of a multi-member LLC. In both cases, Michigan limits the remedies of a judgment creditor to a charging order but does not allow a judgment creditor to reach the member’s LLC interest itself. Once again, this reaffirms my belief that Michigan provides one of the most favorable laws when it comes to asset protection through the use of limited liability companies. For additional information about Michigan’s legislation regarding LLCs, see my December 24, 2010 blog and December 28, 2010 blog.

And if you feel that you might benefit from the creditor protections offered to a member of a limited liability company in Michigan and wish to take advantage of these protections, please give me a call.

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