Bankruptcy Law Questions? Ask a Bankruptcy Lawyer.
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.
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.
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: http://law.justia.com/codes/florida/2005/TitleXLI/ch0726.html
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.