How to Transfer a Florida LLC Interest to a New Owner

Jeramie Fortenberry, J.D., LL.M.

Jeramie Fortenberry, J.D., LL.M.

Attorney

Published Jun 26, 2023 Last updated Jul 10, 2023

An ownership interest in a Florida LLC is generally called a membership interest.1 A membership interest includes the right to participate in the company’s affairs as a member—such as by voting on important matters. It can also include the member’s economic interest in the company—such as the right to share in profits and losses and to receive distributions from the company.

Florida LLC law allows a member’s right to receive distributions from the company—called a transferable interest—to be separated from the owner’s status as a member.2 The result is that a transferee may acquire a right to receive distributions from a Florida LLC without actually becoming a member.3 And, conversely, a person can become a member with a right to participate in the LLC’s affairs without necessarily obtaining a right to distributions.4

A transfer of an ownership interest in a Florida LLC is not the same as a Florida LLC conversion (sometimes called a domestication)—which transfers the LLC itself from its current home state to Florida.

How Does a Business Owner Transfer an Interest in a Florida LLC?

A member’s right to receive distributions from a Florida LLC (transferable interest) is considered personal property that a member can transfer to another person.5 A transfer of a member’s transferable interest by itself does not result in the loss of the member’s status as a member.6 As long as the member does not dissociate from the LLC—or cease to be a member—a member who transfers his or her transferable interest still has voting rights as if the transfer had not occurred.7

A person who receives a member’s right to LLC distributions is called a transferee.8 A transferee acquires the right to distributions that the member would otherwise enjoy, but the transferee receives no right to participate in the LLC’s management or vote on LLC affairs.9 Unless the transferee is also admitted as a member of the LLC, the member who transfers the transferable interest retains all membership rights, duties, and obligations in relation to the company.10

LLC members have wide flexibility to define when and how members can transfer transferable interests. Members establish rules for transfers by incorporating transfer provisions in the LLC’s Florida operating agreement. A transfer of a transferable interest that violates the company’s operating agreement is ineffective as to anyone who was aware or received notice of the transfer restriction.11

Can a Florida LLC Member Transfer Membership to Another Person?

A transferee who receives a member’s right to distributions from a Florida LLC does not automatically become a member.12 A non-member becomes a member—acquiring a member’s rights to participate in LLC affairs—only if he or she is admitted as a member.

A Florida LLC’s operating agreement sets the rules governing admission of new members and transfers of membership interests.13 The general rule in Florida is that if an LLC fails to create an operating agreement—or if the company’s operating agreement is silent on the issue—all members must consent to a new member admission.14

Can a Florida LLC’s Operating Agreement Restrict Transfers of Membership Interests?

It is common for Florida LLC operating agreements to place substantial restrictions on transfers of membership rights.15 Restrictions protect other members’ rights and avoid a situation where a transferee with little prior involvement acquires the right to control the company. An operating agreement may limit membership transfers by requiring, for example, consent of all existing members. Or it can establish qualifications for a person to become a member.

Florida law also allows an LLC’s operating agreement to completely prohibit transfers of membership interests prior to the company’s dissolution or winding up.16 If an operating agreement prohibits transfers, business owners must amend the operating agreement before they can sell or transfer ownership of the company.

An LLC member who surrenders or otherwise loses his or her status as a member is called a dissociated member.17 A dissociated member no longer has a right to participate in the company’s management or affairs. A dissociated member who still has a right to receive distributions from the company is treated as a transferee who holds only a transferable interest.

What Happens to a Florida LLC Interest When a Member Dies or Gets Divorced?

Florida’s default rule is that a member is automatically dissociated from an LLC if the member dies.18 The personal representative of the deceased member’s estate can exercise the deceased member’s rights for the purpose of administering and setting the estate.19

Members can (and often do) decide in advance how deceased members’ interests will be treated. A buy-sell agreement, for example, may provide for a mandatory purchase of a deceased member’s interest by surviving members or by the LLC itself. Buy-sell provisions—which can be in an LLC’s operating agreement or a separate contract between members—can help ensure a deceased member’s heirs receive fair value for the interest without the risk that the heirs will acquire control of the company.

Operating agreements also often include provisions in the event of a member’s divorce. These may include buy/sell provisions or a provision to automatically dissociate a divorced member.20 Provisions addressing divorce limit the risk of losing control of the business to the member’s former spouse—though the spouse may still receive the member’s transferable interest.

What if a Deceased Owner is the LLC’s Only Member?

Under Florida’s default rules, a deceased member is automatically dissociated from the company.21 If the LLC is a single-member LLC, that means it technically has no members when the sole owner dies. A Florida LLC ordinarily must have at least one member, and an LLC with no members for 90 days is automatically dissolved.22

Florida law provides a mechanism through which a single-member LLC with a deceased member can continue. The personal representative of the member’s estate controls the deceased member’s interest in the LLC. The personal representative has the power to consent to the admission of at least one new member of the LLC. If the consent is given and the specified person accepts the appointment within 90 days of the member’s death, the LLC is not automatically dissolved and can continue its operations with the new member.23

As noted above, Florida law allows for considerable flexibility in an LLC’s operating agreement, so a single-member LLC’s operating agreement can adopt a different approach to avoid automatic dissolution of the company.24

Can an LLC Owner’s Creditors Attach an Interest in a Florida LLC?

Florida law allows an LLC owner’s creditor to attach the owner’s interest in the company through a judicial order called a charging order.25 Charging orders can be entered only if the creditor already has a judgment, and they are generally a creditor’s exclusive remedy for involuntarily attaching an interest in a Florida LLC.26

A charging order is essentially a lien on the member’s transferable interest—allowing the creditor to receive distributions that the LLC would otherwise send to the member. A charging order does not give the creditor the right to participate in the LLC’s management and affairs.

Although a creditor cannot ordinarily foreclose on the lien created by a charging order, there is a limited exception if:

  • The LLC is a single-member LLC; and
  • The creditor shows that distributions through the charging order are insufficient to pay off the judgment within a reasonable time.27

If both of these criteria are satisfied, the judgment creditor can ask the court to order a sale of the member’s interest. If the sale occurs, the purchaser receives the member’s entire interest in the LLC (not just the transferable interest), and the purchaser becomes a member.28

Can a Florida LLC Member Voluntarily Withdraw from the Company?

Florida law allows an LLC member to withdraw from the LLC—or voluntarily resign as a member—at any time. A member’s withdrawal is rightful if it is consistent with the company’s operating agreement, or it is wrongful if it breaches the operating agreement.29 A member who wrongfully withdraws is liable to the LLC and its other members for any damages caused by the withdrawal.30

A withdrawing member does not have an automatic right to a distribution from the LLC upon the member’s dissociation—though members can agree in the operating agreement to a distribution upon a member’s rightful withdrawal.

Can a Florida LLC Member Be Expelled from the Company?

LLC members can agree in their operating agreement to terms under which a member can be expelled from the company.31 An operating agreement may, for example, allow expulsion by other members if a member is engaged in unlawful or unethical conduct or conduct that damages the LLC’s reputation or business interests. Florida has a default rule allowing members to terminate another member’s membership if continuing with that member would be unlawful or if the member has transferred all of his or her transferable interest (except through a lien or charging order).32

Another default Florida rule allows other members of the LLC itself to petition a court to enter an order expelling a member who is engaged in:

  • Wrongful conduct adversely and materially affecting the LLC’s affairs;
  • Willful or persistent material breach of the operating agreement or a fiduciary duty; or
  • Conduct relating to LLC activities and affairs that makes carrying on with the person as member not reasonably practicable.33

A dissociated member loses the right to participate in the LLC’s management and affairs, and the dissociated member holds any remaining financial interest only as a transferee.34

  1. Fla. Stat. § 605.0102(29).
  2. Fla. Stat. § 605.0102(66).
  3. Fla. Stat. § 605.0102(67).
  4. Fla. Stat. § 605.0401(4).
  5. Fla. Stat. § 605.0501.
  6. Fla. Stat. § 605.0502(1).
  7. Fla. Stat. § 605.04073(3).
  8. Fla. Stat. § 605.0102(67).
  9. Fla. Stat. §§ 605.0502(1) and (2).
  10. Fla. Stat. § 605.0502(7).
  11. Fla. Stat. § 605.0502(6).
  12. Fla. Stat. § 605.0502.
  13. Fla. Stat. § 605.0106(8).
  14. Fla. Stat. § 605.0401(3)(c).
  15. Fla. Stat. § 605.0401(3).
  16. Fla. Stat. § 605.0601(4).
  17. Fla. Stat. § 605.0603(1).
  18. Fla. Stat. § 605.0602(7).
  19. Fla. Stat. § 605.0504.
  20. Fla. Stat. § 605.0602(2).
  21. Fla. Stat. § 605.0602(2).
  22. Fla. Stat. § 605.0701.
  23. Fla. Stat. § 605.0701(3).
  24. See Fla. Stat. § 605.0105.
  25. Fla. Stat. § 605.0503.
  26. Fla. Stat. § 605.0503(3).
  27. Fla. Stat. § 605.0503(4).
  28. Fla. Stat. § 605.0503(5).
  29. Fla. Stat. § 605.0601(2).
  30. Fla. Stat. § 605.0601(3).
  31. Fla. Stat. § 605.0602(4).
  32. Fla. Stat. § 605.0602(5).
  33. Fla. Stat. § 605.0602(6).
  34. Fla. Stat. § 605.0603(1).