Brandon Business Law Blog

Congratulations to firm managing partner Bob Bivins on beginning his term as the Chairman of the Brandon Chamber of Commerce.

One important pointer for new small business owners that is never stressed enough is the importance of clearly identifying your company as the party to all your company’s contracts.  This is relevant at the opening and the end of each contract.

First, the contract should clearly identify the company as the contracting party.  For example, in the opening of the contract, or on the applicable line of a form contract, the party should be identified as “Doe Industries, Inc., a Florida corporation,” and never as “John Doe” or just “Doe.”

Second, and where more problems arise, is in the signature section.  Often new business owners will sign just their name with no designation of their title or capacity for the company.  In the case where a contract with Doe Industries, Inc. is signed by John Doe, it becomes unclear whether John Doe, individually, is also a direct party or is guaranteeing the obligations of Doe Industries, Inc.  Even worse, if the parties were not clearly identified at the opening, or the contract refers to “the undersigned,” then all of a sudden John Doe, individually, appears to be the contracting party.  In the event of a default, John Doe has lost his corporate liability protection and is now subject to personal liability under the contract.  The name and signature should always be accompanied by the title of the signatory and the name of the company.  For example, “Doe Industries, Inc., a Florida corporation, by John Doe, its President” or “John Doe, in his capacity as President of Doe Industries, Inc.”

This issue can also be compounded when applying for a fictitious name.  For example, if John Doe files a fictitious name registration for “Doe Group” and lists the owner as John Doe, rather than Doe Enterprises, Inc., Doe Group will be an alias for John Doe, individually, essentially creating a sole proprietorship.  If John Doe then enters a contract as Doe Group, he has entered the contract individually (as John Doe d/b/a Doe Group), and not on behalf of Doe Enterprises, Inc.

There are limited defenses available when these mistakes arise.  However, the sound business practice is to not leave this fundamental matter to interpretation or possible dispute.  When in doubt, contact a Florida business law attorney.

Fla. Stat. 732.102 governs the distribution to a surviving spouse of an intestate estate – one in which the decedent did not leave a Last Will – by providing the following three alternatives:

1. the decedent leaves no surviving children, in which case the surviving spouse receives the entire intestate estate;
2. the decedent leaves surviving children, all of whom are lineal descendants (i.e., children of) the surviving spouse, in which case the surviving spouse receives the first $60,000 plus one-half of the balance of the estate; and
3. the decedent leaves surviving children, one or more of whom are not lineal descendants of the surviving spouse, in which case the surviving spouse receives one-half of the estate.

Effective October 1, 2011, Fla. Stat. 732.102(2) is amended to provide that in this second alternative – where there are surviving children, all of whom are descendants of the surviving spouse – that the surviving spouse receives the entire intestate estate.  A new section is also created at Fla. Stat. 732.102(4), which addresses a hybrid family situation where the surviving spouse has children with both the decedent and someone else, and sets the share of the surviving spouse at one-half.

In short, after October 1, 2011, in an intestate estate where the decedent is survived by a spouse, the surviving spouse will receive:

1. the entire estate if (a) decedent leaves no children, or (b) decedent leaves only children who are descendants of the surviving spouse; or
2. one-half the estate if (a) decedent leaves any children who are not descendants of the surviving spouse, or (b) the decedent leaves only children who are descendants of the surviving spouse, but the surviving spouse also has children who are not descendants of the decedent.

Probate can be a complicated and technical process, whether the estate is intestate or not.  Contact a Florida probate attorney for assistance.

I previously wrote about the Florida Supreme Court’s decision in Olmstead v. Federal Trade Commission, in which the Court set forth detailed reasoning as to why a judgment debtor’s interest in a single-member LLC should be subject to levy in addition to the imposition of a charging order.   The dissenting opinion in Olmstead expressed concern over whether that reasoning could then be applied in the context of a multi-member LLC, causing a result contrary to the traditional view on creditor’s rights with respect to LLC membership interests.  On May 31, the Governor signed into law CS/HB 253, which amends Section 608.433 of the Florida Limited Liability Company Act to address that concern.  Laws of Florida Ch. 2011-77 details the revisions, which apply retroactively.

The statute now clearly provides that a charging order is the “sole and exclusive” remedy for a judgment creditor with respect to the membership interest owned by a judgment debtor in a multi-member LLC.  On the other hand, and consistent with Olmstead, the statute now expressly states that a charging order is not the sole remedy in the context of a single-member LLC, provided the creditor can establish that the “charging order will not satisfy the judgment within a reasonable time.”  What will be required to support that showing will be subject to development, however the practical lesson is clear:  assets held in a single-member LLC are not beyond the reach of a judgment creditor of the sole member.

Contact a Florida business law attorney if you have questions about the impact of this statutory revision on your LLC.

One misunderstanding that commonly manifests following the passing of a loved one involves durable powers of attorney.  Often a family member who was designated as attorney in fact under an existing durable power of attorney thinks they may continue to act on behalf of the deceased.  However, “durable” does not mean that the power of attorney survives death, but rather refers to the fact that a durable power of attorney survives the principal’s subsequent incapacity as provided in Fla. Stat. 709.08.

If the family of a deceased individual needs to exercise control over the decedent’s property, then probate administration will need to be commenced and a personal representative appointed or an appropriate court order obtained.

A Florida estate planning and probate law firm can assist with these issues.

Most property owners know that property taxes are due on November 1 of each year, and are considered delinquent if not paid by April 1 of the following year.  Taxes paid early receive a discount of up to 4% if paid in November, which decreases by 1% each subsequent month until March when there is no discount.  However, less often understood is the process that begins on April 1 when property taxes become delinquent.

Delinquent taxpayers receive notices in May warning them of the pending sale of a “tax certificate.”  Tax certificates are advertised in May, and auctioned to investors on about June 1 of each year.  The investor who bids the lowest interest rate on a certificate wins the auction, and is entitled to collect interest at the bid rate.  That rate may be between 0 and 18%, in .25% increments.  The certificate will survive for 7 years, and accrues interest until “redeemed” when payment is made to the Tax Collector’s office.

If a certificate is not redeemed within 22 months of June 1st of the year it is issued (or, viewed differently, 2 years from April 1 of the issue year), the holder of that certificate may apply for a “tax deed.”  The certificate holder must follow certain procedures, including making payment for all outstanding taxes and tax certificates as well as for certain application and processing fees.  If the property owner does not act before the tax deed process is completed, ownership of the property will be transferred to the holder of the tax certificate.

If you own property subject to outstanding tax certificates that are nearing the two year mark, or are the holder of such a tax certificate, a Florida real estate attorney can advise you on your specific rights and obligations.

A recent Florida Supreme Court ruling in the case Olmstead v. Federal Trade Commission, SC08-1009 (Fla. June 24, 2010), has significantly changed the asset protection afforded to single member limited liability companies under Florida law.  Previously, a judgment creditor was limited by Fla. Stat. 608.433(4), which provided that a judgment creditor may charge the LLC membership interest of the debtor, but that the creditor would have only the rights of an assignee.  Essentially, the creditor would be entitled to receive distributions but not participate in management.  As the creditor could not compel a distribution, the debtor controlling a single member LLC could engage the creditor in a waiting game, particularly where non-liquid, long term assets were held by the LLC.  For this reason, LLCs have been used as asset protection vehicles.  Olmstead, however, now provides that, with respect to a single member LLC, a judgment creditor may levy on a membership interest under the general execution statute (Fla. Stat. 56.061) and obtain full title to the interest, including the full rights of membership.

The Court’s reasoning, and a lengthy dissent, are set forth in the 46-page opinion.  In short, the majority reasoned that Fla. Stat. 608.433(4) did not provide for an exclusive remedy preventing execution under Fla. Stat. 56.061.  This is contrary to the popular view among commentators and academics that the charging order is intended to be the sole remedy in the context of LLCs, just as it is in the body of partnership law which has influenced the LLC statutes.  It should be noted that Olmstead is not the first case where a court reached beyond the economic interest; a prior decision in the bankruptcy context similarly resulted in the creditor obtaining governance rights despite the applicable state statute (In re Albright, 291 B.R. 538 (D. Colo. 2003)).  It is also important to understand that Olmstead on its face applies only to single member LLCs, although, as pointed out by the dissenting Justices, it could arguably apply to multi-member LLCs.

From a legal perspective, Olmstead stands to influence rulings in other states, and is certain to be a topic of discussion during the future drafting meetings of the Florida Bar Business Law Section’s LLC Drafting Task Force, which has been preparing proposed revisions to Florida’s LLC statutes.  As a practical matter, if Olmstead is to be undone it will be by amendment to the LLC statutes.

For businesses operating as a single member LLC, Olmstead may not necessitate a change in structure.  Often the business assets will be subject to liens in favor of trade creditors or business lenders, leaving minimal unencumbered assets, and Olmstead does not broaden the ability of a creditor to “pierce the veil” and reach the individual assets of an LLC member.  However, for those utilizing a single member LLC with the goal of protecting assets placed into the LLC, that strategy must now be re-evaluated.  Contact a Florida business law attorney if you have questions about the impact of Olmstead to your LLC.

On about July 21, 2010, Governor Crist issued Executive Order 10-169, which authorizes the Property Appraiser’s offices in counties affected by the Deepwater Horizon spill, which includes the coastal counties  of the Tampa Bay area, to provide taxpayers with an interim assessment for claims purposes only.

Often when a corporation ends business its principals simply stop filing annual reports with the Division of Corporations and allow the corporation to be administratively dissolved.  One important consideration often overlooked is the continuing liability under an administratively dissolved corporation.  While administratively dissolved, shareholders, officers, and directors may bear personal liability for acts they take on behalf of the corporation while they know the corporation to be administratively dissolved (F.S. 607.1421).  When formally dissolved, however, shareholders are generally not liable for claims, and in any event are not liable for any amount exceeding what is distributed in the dissolution (F. S. 607.1406-1407).  Where a company is insolvent and makes no distributions to shareholders upon dissolution, there would generally be no liability.  A Florida business law attorney can assist with the dissolution process.