1. Limited liability of owners and managers for entity level acts;
2. Limited ability to “take” an ownership interest away to collect for an outside personal liability.

Most of us have believed that a single member LLC (just one owner) was at some risk if a collection effort against the owner sought to take the LLC membership interest away.  After all, no one else would be affected except the debtor owner.  Regrettably, the decision of the Florida Supreme Court in Olmstead v. Federal Trade Commission, SC08‑1009 (June 24, 2010) http://caselaw.findlaw.com/fl-supreme-court/1528945.html  has reached beyond that to frame a solution for an unasked question.  This decision places the protections of multiple member LLCs in serious question.

O.K., so what?  Damage to the fragile business climate of Florida is the WHAT!  That is not an overstatement.   LLCs are the most popular form of business today due to their dual protection attributes.  Justice Lewis in his dissent points out the numerous problems and errors of the position taken by the majority.  His minority opinion would probably get a typical attorney disciplined, but he is an equal, a colleague of the Supreme Court, and can say those things without risk.  It is a bad day, and we are seeking the best form of replacement planning for our clients.  No doubt that some businesses will reestablish in other, more protective states.  Even if they continue their business activities for now in Florida, state fees are going elsewhere.  Further, many businesses are able to move to other warm climates more favorable than Florida – can you say Nevada?  Even Colorado s favorable if not wam (Florida in August?  Colorado sound good!).

LLCs have been a very capable tool in estate planning as well, allowing the grouping of assets, structuring buy-sell agreements, providing for active business continuity, and providing for post-death control by the best equipped person.  That may move outside of Florida as well – and many times the families will follow.  Nevada has no income tax . . . . .

I can’t help but think that the Federal Trade Commission as a litigant somehow impressed the Court in favor of the FTC position.  Whatever the reason behind the faulty reasoning, the Court has erred.  Allan Gassman, a lawyer well versed in the use of LLCs in estate planning observes:  Well respected bankruptcy and debtor-creditor lawyers have commented that the Supreme Court will be severely criticized for this “non-business law savvy” decision.

In the meantime, if your planning is critical, you may wish to rethink your single member LLC to at least have another member, or to call your counsel to reconsider your plan as a whole.

The costs are not astronomical, but they are now somewhat more significant. The costs vary dependent on which court has jurisdiction, the type of suit, the number of parties to the suit, and other issues. A completely bizarre suit will likely be dismissed quickly, possibly with an award of attorneys fees. You must bring this by motion before the court, probably through legal counsel, at your expense. Even if the action is dismissed and you recover your fees, you have still been distressed by this, and used some of theat rare commodity, time.

So why discuss this if there isn’t any way to prevent suits? Answer – because there are ways to minimize the effect of suits. In the instance of recreational clubs, good and effective releases are important. Requiring use of all the proper safety equipment, with the agreement to do so in the same written release. Insure the organization – and for that matter HAVE an organization (probably under one to the sub-parts of the Internal Revenue Code at Section 501(c)). Insure the organization and its officers and directors for a reasonable sum. Recreational organizations can usually find special interest groups or associations which are sources for insurances. Insist upon minimum skills or training for joining in on activities. Provide training in the basics (or more) for beginners. Keep records of the training. Create a report form for incidents, and keep a signed copy in your records. These steps are to protect members from each other, as well as the organization and its leaders.

These concepts translate into a business environment as well. Have an entity that protects you; carry insurances; train, train, train to minimize injury; keep records and take good reports for every incident. These things may discourage suits, will reduce factual uncertainties, and help quantify any liability. While eliminating lawsuits is not realistic, minimizing their effect is.

 

10. Stability of tenure of personnel: rapid turnover of personnel should be avoided because of the time required for the development of expertise.

11. Initiative: all employees should be encouraged to exercise initiative within the limits imposed by the requirements of authority and discipline.

In the ninety years since these principles were formulated, much has changed in the work place. Nevertheless, these managerial principles are based on such solid thinking that they are still valid.

Ignore the business attire to the left – we just wanted attention!

YOU ARE THE LEADER

If you call a meeting, whether it’s with employees, a client or a vendor, be prepared to lead it.  You called it; you must know why.  Don’t depend on others – instead, prepare. An agenda outline is advisable.  Don’t go overboard with detail, or the meeting is without meaning.  Meetings are for ideas, discussions, and feedback, not merely announcements and notices.  Your invitees will know from the agenda what you expect to achieve at the meeting.  As a courtesy, and if possible, distribute a copy of the agenda to the other participants at least a day or two ahead of time.  Remember, everyone is busy.  You will accomplish more at your meeting, and appear far more professional.

CLEAN MACHINE

Often it is sensible to drive with fellow employees, colleagues or clients to another location. It is not a positive reflection upon you or your company if your vehicle is a pigpen.  A clean machine reflects positively.  If you don’t have the time or inclination to clean the vehicle yourself, pay a professional detailer to do the job.  If your vehicle isn’t capable of being made presentable, consider a rental car.  Sometimes the image is important enough to go the extra step.

RECOMMENDATIONS OF OTHERS

You cannot do everything.  If the occasion arises that requires a referral to others, be careful.  Check the person or company’s present reputation first.  Not only is poor workmanship and the attendant damage to your reputation at risk, but it is also possible that a referral recommendation can get you sued unless you received up-to-date information beforehand.  After all, you provided your opinion endorsing that person or company, thus your neck may be on the line.

Remember that the extra effort to give a referral, whether within or outside of you own field of endeavor, not only is because going the extra mile may encourage this customer or client to return another day, but also is to seek return referrals from the party to whom you are referring.  It is not offensive to write a note with the name of the party to whom you are referring and say: “Always seemed to do good work, but I have no current knowledge” OR “Present reputation seems good, but I haven’t worked with XXX for a couple of years.” At the same time, you might suggest to the referral that if they can give you a minute, you will call XXX and talk to one of the people you know there to see if they could consider their assignment.  NOTE: if the party you are referring says “Thank you,” be sure to say “You are welcome” – but add: “I’m sure you would do the same if our positions were reversed.” This engenders a sense of obligation to pass on the goodwill, often back to you.