We recently reviewed some great creditor protection strategies that can be included in any Florida LLC Operating Agreement. This is continuation of that snapshot to offer 3 reasons why an LLC for Florida Asset Protection can offer an effective and simple solution.
As a refresher, creditor protection in Florida is a term that is used interchangeably with asset protection in Florida, and this concept, however described, is about taking steps to make your valuable assets less vulnerable in the event of a lawsuit. By referring to your estate assets in Florida, we are talking about anything you own that has value including financial accounts, business interests, real estate, and even personal property.
LLCs in Florida [Asset Protection in a Litigious Society]
We live in a very litigious society, in part due to the fact that hiring a plaintiff’s attorney to sue someone can be easily accomplished with no risks or out of pocket cost.
Let that sink in for a moment. Accidents, business disputes and creditor disputes are all sources of potential litigation and liability for average people.
The wealthy and corporate America adopt complex asset protection strategies through using business entities and trusts, but what can the average person do to obtain affordable asset protection?
The average person, meaning someone who is not uber wealthy, will likely suffer greater injury from a random lawsuit than a wealthy person or large corporation. Most asset protection strategies such as Asset Protection Trusts are not cost effective for average people with less than 1 million dollars in liquid assets.
This article offers some insights about how an average person can create asset protection by using a well drafted LLC to shield personal and business assets such as bank accounts, investments, boats, collectibles and other personal assets. These strategies can be used by the wealthy person as well as the average Joe.
3 Reasons LLCs Offer a Great Asset Protection Solution in Florida
1. LLCs Are Flexible, Easy To Create And Inexpensive To Maintain
LLCs may be filed in every State and they may be utilized for business or investment purposes. This means that if you have valuable assets such as boats, classic cars or antiques, an LLC may be utilized to hold title to those assets. In most circumstances, LLCs are less expensive than Trusts to create and maintain. LLCs are filed by simply preparing Articles of Organization in the desired State and filing them by paying the appropriate filing fee. When an LLC has been filed of record, then assets may be titled in the name of the LLC. An LLC may be assigned a separate tax id number for banking or investments and may hold legal title to virtually any asset.
2. LLCs Offer Enhanced Protection With An Operating Agreement Designed For Asset Protection
In addition to the state filing, a solid asset protection LLC should include a well drafted Operating Agreement. Various kinds of “creditor protection” provisions that may be included in your LLC operating agreement in order to restrict the options of a creditor in the event of a lawsuit or legal judgment. These provisions can extend greater protection to the LLC than what is provided by the State LLC Statutes. Thus, it is highly recommended as opposed to simply filing a boilerplate LLC.
3. LLCs Offer Advantages Beyond Individual Ownership Such As Survivorship Benefits And Charging Order Protection
LLCs provide protection from creditors through what is known as “charging order protection”. Charging order protection is like a garnishment order for a business entity. Charging order rights means that a creditor’s remedy against an LLC is limited to an order to “charge income” from the LLC and the creditor would otherwise be prevented from placing liens upon and forcing the sale of the LLC assets. Additionally the members may maintain the sole right to determine whether any income is paid from the LLC, so the creditor may be stuck with a piece of paper. LLCs also offer the right of survivorship between members so that probate wouldn’t be required, and this is an important consideration for estate planning purposes.