LLCs as Creatures of Contract: Don’t Overestimate this Legal Fiction
I recently sat down with a nonprofit to discuss the asset protection tenets of LLCs, among other things, and was particularly intrigued by where our conversation headed. It was a smart group, to boot, so I took them on a ride all the way back to what LLCs are in their most primitive form: creatures of contract. LLCs exist by virtue of state statutory schemes. In Florida, the Revised Limited Liability Company Act (the "Act") requires the filing of articles of organization with the Department of State in order to form the LLC. The articles of organization is really just a contract between the [...]
The LLC Is No Magic Carpet | Personal Liability
I'm consulted quite frequently on the efficacy of using an LLC to protect oneself from personal liability. I find that most people, including prospective clients and their advisors, believe the LLC to be the magic carpet that will carry them far, far away from personal liability should potential litigation start to appear on the horizon. Well, magic is rarely a defense, and throwing your liability-prone asset into the arms of the LLC may not get you very far. This myth is promulgated by a loose understanding of the liability protection offered by the LLC. The LLC is certainly a behemoth of an entity [...]
PACC Event: Commentary on the Panama Papers
I happily accepted an invitation by the Panamanian American Chamber of Commerce to briefly speak on the Panama Papers at their last networking event. The event, appropriately entitled "Commentary on the Panama Papers," was sponsored by the Carolina Ale House and Ron Abuelo. There were many points of discussion, all of which I crammed into a fifteen minute conversation, but all in all I thought my comments were well received. In fact, I was very much delighted to see the huge amount of interest everyone had in the topic and relished the opportunity to clarify Panama's well-documented stance on international transparency and correct [...]
Lawsuit Abuse in Florida
Lawsuit abuse is reason for worry. A survey conducted by the National Federation of Independent Business (NFIB), in conjunction with Sick of Lawsuits, found that 92 percent of small business owners in Florida believe that lawsuit abuse is stunting their growth. According to NFIB's Florida Chapter, "Lawsuit abuse is turning Florida's business climate into a climate of fear for small business owners." Now, 92 percent is a staggering number, but who doesn't think lawsuit abuse is a problem? The answer is obvious. Most interesting, though, are the additional findings, and what follows is a discussion of these statistics under the purview [...]
The Mind of a Personal Injury Attorney
Someone near and dear to me was involved in an accident. Nothing life threatening, thank goodness, but severe enough for her neighbor to recommend an "excellent attorney." As an aside, I do wonder which statement came first: that, or hopefully, "how are you feeling?" Anyway, welcome to America's litigious society. I was asked to attend the initial consultation, you know, because I am an attorney and my nearest and dearest insisted I go -- no problem. It is this conversation from which I'll now relate. First, hands down to the personal injury attorney; he definitely knew his stuff. After going through [...]
Common Types of Creditors
The United States is an extremely litigious society with result-oriented judges and juries frequently ruling in favor of the creditor plaintiff. The judgments have the potential to bankrupt both businesses and individuals, the litigation is costly and winning may only amount to a pyrrhic victory. Therefore, limiting your liability through asset protection planning greatly reduces your personal and business exposure to the many risks associated with living in the United States. The following is a sample of the different types of creditors likely to be on the other side of the lawsuit: Tort creditors A tort is defined as an act that injures [...]
Arizona Charging Order Subject to Garnishment Limit
The plaintiff successfully sued the defendant in Arizona. The judgment required the defendant to pay restitution to the plaintiff by way of $300 minimum monthly payments. This amount later increased to $750 and lo the defendant could no longer afford it. The plaintiff then sought a charging order against the defendant's limited liability company (LLC) which the court granted. Arizona Law: Charging Order and Garnishment Under Arizona law, "[A] court of competent jurisdiction may charge the member's interest in the limited liability company with payment of the unsatisfied amount of the judgment plus interest." A.R.S § 29-655(A). (internal quotations omitted.) In [...]
Will The Court Uphold Your Homestead Exemption?
Florida's constitutionally mandated homestead exemption is the holy grail of exemption planning. Its purpose is to protect the sanctity of the home by providing a shelter for the owner and his family immune from the money judgments of creditors. In other words, the homestead is exempt from forced sale in all but three limited exceptions: (1) taxes; (2) contracts to repair, improve or purchase the property; and (3) obligations owed to those who perform labor on the realty. Naturally, then, the homestead has been the bane of creditors and a source of frustration for the judicial system. Cunning debtors, in [...]
The Panama Papers: What You Don’t Know
The Panama Papers: A trove of documents leaked from a Panamanian law firm brought the offshore world right to your doorstep. The published files -- 11.5 million of them -- exposed the secret financial dealings of some prominent figures and revealed webs of corruption, money laundering and fraud. According to The Economist, the documents show "the offshore holdings of 140 politicians and officials, including 12 current and former presidents, monarchs and prime ministers." In addition, it is alleged that the ill-gotten wealth acquired from transacting with "rogue states, terrorists or drug barons" was hidden behind anonymous corporations with fake directors or shareholders ("nominees"). Close associates to [...]
Split Your LLC Interest Into Two Parts
LLC ownership is evidenced by an LLC interest. The nature of this interest is determined by contract -- the LLC operating agreement -- or by statute. Uncommon to most, your ownership in the LLC is actually split up into two parts: (1) transferable interest and (2) nontransferable interest. Transferable Interest and Nontransferable Interest The transferable interest is your economic right to receive distributions and share in the profits of the LLC. The nontransferable interest includes your right to vote, obtain information (i.e. books and records) and that other than your transferable interest. Together, both of these interests make up your LLC [...]
Author
Ronald C. Iacone Jr., Esq.
Ronald Iacone is the managing and founding partner of Iacone Law. He focuses his practice on asset protection representation, business and international law, and appeals to the interrelatedness of the three to best discuss your issue and solution.