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Brent Blanchard
Brent Blanchard, Attorney
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Can a marital couple LLC own a professional LLC belonging to

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Can a marital couple LLC own a professional LLC belonging to the husband and in which the wife is a minor share holder? Does this offer more legal protection from creditors in Florida?
Submitted: 4 years ago.
Category: Business Law
Expert:  Brent Blanchard replied 4 years ago.
Thank you for your question.

Sorry, the ONLY persons who can own a professional corporation are those who are licensed for that specific profession. If a corporation is one of the owners, it must also be owned by ONLY persons thus licensed.

The only exceptions I have seen are allowances for spouses to own essentially an "income only" interest in a law practice or medical practice professional corporation after the licensed spouse dies, to allow inheritance and retirement benefit rights to survive.

The best protections from creditors in Florida for a professional corporation are:
1. Impeccable professional performance to minimize the chances of even bogus malpractice claims;
2. A deep pocket of insurance coverage to satisfy all but the most greedy or the most grievously-harmed; and
3. Putting assets into exempt classifications such as the homestead, so they are not reachable by creditors anyway. This can backfire if so much money is taken out of the business that it cannot meet its obligations OR its reasonably foreseeable tort liabilities. See #2 above.

Thank you.

BAB.

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Brent Blanchard, Attorney
Category: Business Law
Satisfied Customers: 1909
Experience: Thirteen years of business law experience, from business formation to litigation
Brent Blanchard and 4 other Business Law Specialists are ready to help you
Customer: replied 4 years ago.
Perhaps, I was not clear. What I am asking is whether a couple can form two LLCs. One whichis the professional LLC in which the wife is a minor share holder for inheritance reasons. then can they form a marital LLC which owns the first?
Expert:  Brent Blanchard replied 4 years ago.
Professional LLCs (usually called professional corporations) can be engaged ONLY in the business of the relevant professional license. A Marital LLC cannot be a "licensed" "person" with an ownership stake in a Professional LLC unless both marital partners hold the requisite licenses.

Chapter 621 of Florida Statutes governs professional LLCs. You can read it here: http://www.flsenate.gov/statutes/index.cfm?App_mode=Display_Statute&URL=Ch0621/titl0621.htm&StatuteYear=2009&Title=-%3E2009-%3EChapter%20621.

The relevant part is:

621.09 Limitation on issuance and transfer of ownership.--

(1) No corporation organized under the provisions of this act may issue any of its capital stock to anyone other than a professional corporation, a professional limited liability company, or an individual who is duly licensed or otherwise legally authorized to render the same specific professional services as those for which the corporation was incorporated. [. . .]
(2) No person shall be admitted as a member of a limited liability company organized under this act, unless such person is a professional corporation, a professional limited liability company, or an individual, each of which must be duly licensed or otherwise legally authorized to render the same specific professional services as those for which the limited liability company is organized.

The US Small Business Administration has some good general guidelines here: http://www.business.gov/states/florida/start.html.

So, back to the original answer, what you propose is possible only if everyone having an ownership interest in the entities is licensed in the profession for which the professional LLC was formed. Minority shareholder status does not help.

Thank you.

BAB.
Brent Blanchard, Attorney
Category: Business Law
Satisfied Customers: 1909
Experience: Thirteen years of business law experience, from business formation to litigation
Brent Blanchard and 4 other Business Law Specialists are ready to help you
Customer: replied 4 years ago.
What I additionally asked was whether two medical professionals owning separate LLCs, in the same area of expertise, could gain increased protection from debtors by making each other equal partners in each other's LLC in the State of Florida?
Expert:  Brent Blanchard replied 4 years ago.
In theory, yes, since the charging order is supposed to be the exclusive remedy for the LLC's creditors.

However, that protection has been eroded for single-member LLCs in recent years in several notorious cases, most importantly for you, the The Florida Supreme Court's decision in Olmstead v. FTC held a charging order is not the exclusive remedy of a creditor of a member of a single-member Florida LLC.

Pasted from an e-mail I received yesterday advertising a continuing legal education course.

So, the minority shareholder tactic is now looking like the best approach because it preserves the more traditional protections. I would still expect this to be further eroded for spousal teams, though. But for now, it is the strongest.

Please note that the asset protection and compartmentalization of risk benefits of the LLC form are limited to ordinary creditors of the professional enterprise. Malpractice liability still flows "upstream" to the licensed individual(s), for "public policy" reasons. Until the LLC revolution starting in Florida a few decades ago started changing things, professionals were actually prohibited from operating as corporations. Again, it was "public policy" related to making sure citizens injured by professional malpractice could be more assured of getting a meaningful recovery.

This is reflected in this part of the statutory scheme:

621.07 Liability of officers, agents, employees, shareholders, members, and corporation or limited liability company.--Nothing contained in this act shall be interpreted to abolish, repeal, modify, restrict, or limit the law now in effect in this state applicable to the professional relationship and liabilities between the person furnishing the professional services and the person receiving such professional service and to the standards for professional conduct; provided, however, that any officer, agent, member, manager, or employee of a corporation or limited liability company organized under this act shall be personally liable and accountable only for negligent or wrongful acts or misconduct committed by that person, or by any person under that person's direct supervision and control, while rendering professional service on behalf of the corporation or limited liability company to the person for whom such professional services were being rendered; and provided further that the personal liability of shareholders of a corporation, or members of a limited liability company, organized under this act, in their capacity as shareholders or members of such corporation or limited liability company, shall be no greater in any aspect than that of a shareholder-employee of a corporation organized under chapter 607 or a member-employee of a limited liability company organized under chapter 608. The corporation or limited liability company shall be liable up to the full value of its property for any negligent or wrongful acts or misconduct committed by any of its officers, agents, members, managers, or employees while they are engaged on behalf of the corporation or limited liability company in the rendering of professional services.

Thank you.

BAB.

Customer: replied 4 years ago.
Can you refer me to a Florida attorney or one licensed in Florida to create a dual minority shareholder LLC.?
Expert:  Brent Blanchard replied 4 years ago.
Sure. I believe that David includes this in his practice:

David Goldman, AttorneyApple Law Firm PLLC3733 University Boulevard West, Suite 212BJacksonville, FL 32217 Tel (NNN) NNN-NNNN

Thank you.

BAB.
Brent Blanchard, Attorney
Category: Business Law
Satisfied Customers: 1909
Experience: Thirteen years of business law experience, from business formation to litigation
Brent Blanchard and 4 other Business Law Specialists are ready to help you

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