When someone dies in Florida owning property titled solely in his/her name, the deceased person’s estate will likely go through probate. Depending on several factors, probate may result in a long and stressful experience for the decedent’s beneficiaries and heirs.
Therefore, if anyone owns titled assets but wants to avoid court interference in the event of death, setting up a trust may provide a resourceful solution. You may ask yourself, is it possible to own share
(s ) of interest in a limited liability company (LLC) through a trust?
In this article, you will find out whether one can own interest in a Florida LLC in a trust.
Can a Trust Own an LLC in Florida? – Understanding the Basic Elements
A trust is a legal arrangement in which the trust maker (referred to as trustor or settlor) transfers the ownership of property to a trustee (fiduciary) for the benefit of one or multiple beneficiaries.
One of the vital aspects to ensure the enforceability of trust is funding the trust. Essentially, a trust exists to benefit its beneficiaries. Hence, how will a trust exist as a solid arrangement without any assets held within it?
Accordingly, a trustor (or settlor) must fund the trust by transferring ownership of assets to the name of the trust. Similarly, limited liability companies (LLCs) are business structures that combine the characteristics of corporations and partnerships, serving as valuable estate planning tools.
Hence, this type of business entity grants owners (referred to as “members”) limited liability from the company’s debts and obligations. For example, if a creditor is awarded a judgment against an LLC, its member personal assets are protected from any creditor’s claims.
Many Florida residents transfer the ownership of property to a limited liability company (LLC) to avoid probate, judgments from creditors, and other issues that may affect the ownership of property.
Still, a common question is whether a member of an LLC can transfer the ownership of his/her share of interest in the company to a Florida trust. Ultimately, the answer depends on how the company was originally structured and the existence of an operating agreement.
Can a Trust Own an LLC in Florida? – The Verdict
As provided by Florida law, a wide array of “persons” can be members of an LLC, including an “individual, business corporation, nonprofit corporation, partnership, limited partnership, limited liability company (…), trust, or another legal or commercial entity.”
Therefore, the member of an LLC can transfer the ownership of his/her share of interest in the company to the name of a trust. Still, before transferring ownership, the individuals involved must review the business’s operating agreement.
An operating agreement is a legal document that contains all the instructions and provisions by which a limited liability company must operate in Florida. Although not a mandatory document, it is crucial to guarantee professionalism and prevent future issues.
When reviewing the document, the members interested in transferring ownership to a trust must identify whether there is any language in the operating agreement preventing or precluding the membership interest from being titled to a trust.
In certain cases, some operating agreements drafted by multiple parties tend to limit the transfer of ownership of an interest in the company. Ultimately, each case is different, and likely requires the viewpoint of an experienced legal advisor.