Limited liability companies (LLCs) are hybrid business structures that combine the solid legal protection granted by corporations with the flexibility of partnerships. Additionally, LLCs are often used for estate planning purposes in Florida.
In this article, you will have an overview of the estate planning advantages of Florida LLCs.
What Are the Estate Planning Advantages of Florida LLCs? – Full Overview
Simplicity and Efficiency
Florida LLCs are notorious for the simplicity involved in their formation, organization, and administration. If you want to avoid large amounts of paperwork and strict business formalities, an LLC is the ideal business structure for your case.
The term “limited liability” refers to the concept that the owner of an LLC is only liable for the company’s debts to the amount invested by him or her. On the other hand, the LLC is not liable for the owner’s personal debts as well.
Assets titled in the name of the company are protected against claims from personal creditors, while assets held in the owner’s name are protected against the company’s creditors.
In estate planning, many Florida residents rely on the limited liability aspect to protect personal assets and ensure a smooth succession upon death.
Membership Interest Succession
Florida LLC owners are referred to as “members.” Each member owns a respective share of interest in the LLC, which varies depending on how the company was structured, the amount invested by each member, and other aspects outlined in the business agreement.
If a Florida resident dies owning an interest share of an LLC, his or her interest in the business is subject to probate. Probate is a court-supervised process to distribute the decedent’s assets under Florida law.
Depending on the size and value of the decedent’s estate, this process may result in a time-consuming and expensive property. Consequently, many Florida residents prefer to transfer their interest shares to a trust to guarantee a smooth succession process.
Some families use LLCs to protect their assets collectively and restrict the transfer of ownership interests exclusively among family members. This approach requires a solid operating agreement tailored to this specific goal, which is impossible to attain without expert legal guidance.
Another crucial aspect of family-owned LLCs is drafting a solid buy-and-sell agreement between members. This way, in the event of death or incapacitation of one of the members, the other members must buy back the remaining interest share.
Asset Protection Against Individual Creditors
When an asset is titled in the name of an LLC, it is no longer considered individual property. The business entity itself owns the asset, and the members own interest shares in the company.
For example, let’s say one of the members owes money to a creditor in Florida. Before borrowing the money, the debtor transferred the title of his primary home and vehicle to the LLC.
If the creditor attempts to attach a judgment or lien against property titled in the LLC’s name, it is impossible to collect the owed amount from the company. In such a case, the creditor can only go after the debtor’s personal assets to fulfill the owed amount.