Thoughts About Single Member LLC
Asset protection benefits of a single member limited liability company are often challenged by attorneys who point to the Ashley Albright bankruptcy case where a Colorado bankruptcy judge permitted a trustee to seize the assets of a single member LLC. This case is used as the basis to advise Florida residents against relying on single member LLCs for asset protection.
An attorney colleague, Mr. Gary Forster of Winter Park, makes a good point in rebuttal. Gary argues that prior to 1997 Florida did not allow single member LLCs. At the same time, the state statutes limited creditor collection actions against an LLC interest to charging liens. In 1997, the Florida legislature changed the law to specifically permit a single member LLC, but the legislature did not change the law that limited creditor remedies to charging liens. Gary points out that if the Florida legislature believed that charging lien procedures and protections were any less applicable to a single member LLC it would have made the appropriate amendment when it authorized the single member LLC. By leaving the creditor remedy unchanged, the legislature showed an intent that the single member LLC was the beneficiary of the same protections afforded to all LLCs.
I agree with Mr. Forster that single member LLCs provide effective asset protection under current Florida law, although legal developments on this issue in Florida and other states may change planning recommendations.
I have 2 properties that I rent out in Florida. I live in another state. We are thinking of setting up a single member LLC to own them to protect our assets in the event that we get sued. We are very careful landlords - have signs and checklists and on and on but it only takes one person to ruin you, so I would appreciate yor opinion. If we sell one of the ppties - being an LLC owning them, would the profit or gain tax be the same or higher than for a private individual?
Dear Susan:
I would suggest seting up an LLC for each property. That way one bad apple does not bring down the other.
The tax effects of an LLC are basically the same as an individual. An LLC is a pass through entity; meaning all income and losses flows through to the individual shareholders on their K-1 statements from the LLC's tax return.
Can a LLC own a LLC in the State of Florida, and if so what are the tax remifications of profit and losses
Can a LLC own a LLC in the State of Florida, and if so what are the tax remifications of profit and losses
How would Desmond v. U.S. Asset Funding, LP (In re Desmond), 316 B.R. 593 (Bankr. D.N.H. 2004) play into your analysis?