When running an LLC (limited liability company), one of the main advantages is protection from personal liability. However, the involvement of personal creditors causes many business owners to wonder if they could be at risk. Understanding the nuances of Florida law on this matter can help you protect your assets.
Understanding LLC protection
An LLC generally provides liability protection, meaning your personal debts should not affect the business. The LLC is a separate legal entity from you, shielding the business from personal creditors. In most cases, personal creditors cannot go after the assets of your LLC.
Charging orders
In Florida, creditors may pursue a charging order against an LLC owner’s interest in the company. A charging order allows a creditor to receive any distributions that the LLC makes to the debtor-owner. However, this doesn’t grant the creditor control over the LLC itself or access to its assets. This provides a level of security, though creditors could still benefit from any payouts you might receive.
Exceptions to LLC protection
There are some exceptions where an LLC might not protect you from creditors. If you personally guarantee a business loan or co-mingle personal and business assets, a creditor might be able to pursue both personal and LLC assets. A court may hold you personally liable for the involvement of your LLC in fraudulent activities.
Finding the balance
In commercial litigation, an LLC provides significant protection against personal financial exposure. Florida law offers safeguards that shield your business. Ensuring a strict separation between personal and business finances helps maintain this protection.