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Roger, Attorney
Category: Bankruptcy Law
Satisfied Customers: 30905
Experience:  BV Rated by Martindale-Hubbell; SuperLawyer rating by Thompson-Reuters
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With regards XXXXX XXXXX protection in the State of Florida.......I

Customer Question

With regards XXXXX XXXXX protection in the State of Florida.......I am lookingto protect a LLC that I have been a sole member of for many years. The LLC owns a piece of commercial real estate with some equity and has a commercial checking account with cash as well. Numerous (11) unsecured creditors will soon be serving me with lawsuits from unpaid bills from 3 years ago. One was ringing my doorbell tonight... I have read that adding your wife as a member will not hold up in court once a judgement has been secured. What about adding my 2 children as {members|minority stockholders and putting profits into their savings accounts accordingly. What are my other options to protect this LLC? I want to cover myself in advance of being served....not after.
Submitted: 3 years ago.
Category: Bankruptcy Law
Expert:  Roger replied 3 years ago.

Hi - my name is Kirk and I'm a Bankruptcy litigation attorney. Thanks for your question.

Unfortunately, adding members will not protect the LLC from its creditors. Instead, it would just be bringing in members who would also be inheriting his/her share of liability for the company's debt as a member.

Also, under the fraudulent transfer act, if you were to transfer interest in the LLC, it could be reversed because the law prohibits a transfer of assets once a person/entity is on notice of being sued or has actually been sued. Thus, that's not a good idea either.

The only way to protect your company from creditors is by filing chapter 11 bankruptcy. IF you do that, the creditors must stop any collection efforts because of the automatic stay provisions under the bankruptcy code. The chapter 11 will allow you to work out a payment plan to pay these creditors without them coming after you. It allows you to dictate the action instead of allowing to creditors to. You can work out a repayment plan and get it approved by the court to pay these debts to the creditors on your schedule instead of theirs.

Customer: replied 3 years ago.

Kirk. Although your answer is exactly what I did not want to hear, I appreciate it. Looks like I will move to plan B. Clear cash from corporate account, sell property and move funds to a residential property and claim homestead. I understand this is completely fair game for Florida but Chapter 7 or 11 would not be options with this plan.

Expert:  Roger replied 3 years ago.

I really appreciate you not shooting the messenger!

You should be extremely careful about transferring property/assets/money of the company because you could face issues and exposure under the fraudulent transfer act, which you can read here:

A chapter 7 is a complete liquidate, which would mean that the business would shut down and lose everything. However, a chapter 11 would allow you to keep the business running and also pay these creditors over time at a monthly rate you can afford.