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Successor liability becomes a live question when a judgment debtor stops operating through one company and begins conducting business through a newly formed LLC. The new entity may perform the same work, employ the same personnel, use the same equipment, serve the same customers, and remain under substantially the same ownership and management. Meanwhile, the original judgment debtor may be left with few assets available for collection.
Florida law does not automatically make the new LLC responsible for the old company’s judgment merely because the businesses look similar. The circumstances surrounding the transition, however, can support several different enforcement theories. Proceedings supplementary may provide a mechanism for reaching property associated with the judgment debtor, transferred assets may be recoverable under Florida fraudulent transfer law, and the new company may potentially face successor liability if the evidence establishes one of Florida’s recognized exceptions to the general rule of corporate separateness.
The Analysis Begins With What Changed Between the Two Businesses
When a business moves from one entity to another, the investigation extends beyond whether a formal asset purchase agreement exists. The analysis examines what happened to the operating business as a whole, including its management, ownership, employees, equipment, contracts, customers, locations, licenses, receivables, and other sources of value.
Florida successor liability law makes those facts important. Under Bernard v. Kee Manufacturing Co., 409 So. 2d 1047 (Fla. 1982), liabilities of a predecessor may be imposed on a successor when the successor expressly or impliedly assumes those obligations, the transaction amounts to a de facto merger, the successor is a mere continuation of the predecessor, or the transaction is a fraudulent effort to avoid the predecessor’s liabilities. Bernard adopted the traditional corporate law rule and declined to extend successor liability beyond those exceptions. The Fourth District continued to apply that framework in Herman v. Lopez, No. 4D2023-2414 (Fla. 4th DCA Jan. 22, 2025).
Accordingly, the fact that a debtor created another LLC is only the starting point. The greater concern arises when the evidence shows that the operating business effectively moved from the judgment debtor into the replacement company while the liabilities remained behind.
A New LLC May Be a Mere Continuation of the Judgment Debtor
Florida courts evaluating de facto merger consider continuity between the predecessor and successor, including common management, personnel, assets, locations, and stockholders. 300 Pine Island Associates, Ltd. v. Steven L. Cohen & Associates, P.A., 547 So. 2d 255, 256 (Fla. 4th DCA 1989), identifies those factors as evidence that one company has effectively been absorbed into another. Mere continuation is a related but separate exception, and its key element is a common identity of the officers, directors, and stockholders. Amjad Munim, M.D., P.A. v. Azar, 648 So. 2d 145, 154 (Fla. 4th DCA 1994).
The Fifth District’s decision in Laboratory Corporation of America v. Professional Recovery Network, Inc., 813 So. 2d 266, 270 (Fla. 5th DCA 2002), provides a useful way of framing the inquiry: whether the two businesses have each operated independently or whether there has effectively been a “relay-style passing of the baton” from one to the other.
That analysis involves more than comparing company names. Relevant facts may include whether employees moved together, whether the same people continued managing the operation, whether equipment formerly used by the judgment debtor is now being used by the new business, whether the same phone numbers or locations continue to be used, and whether the predecessor stopped pursuing new work as the successor began operations.
No single fact necessarily establishes successor liability. The significance comes from the overall continuity between the two enterprises and the circumstances under which the transition occurred. Ownership continuity carries particular weight, because a mere continuation theory generally fails where the new company is owned by someone other than the people who owned the judgment debtor.
Successor Liability Can Be More Significant Than Recovering a Transferred Asset
Successor liability should be distinguished from a claim seeking recovery of a particular transferred asset. The distinction can materially affect the potential remedy.
If the judgment debtor transferred a truck worth $50,000 to another company without receiving appropriate value, a fraudulent transfer claim may provide a means of recovering the asset or its value, subject to Chapter 726 and the defenses available to the transferee. Successor liability presents a broader question: whether the circumstances justify imposing the predecessor’s existing liability on the successor business itself.
Successor liability and fraudulent transfer liability are distinct theories even when they arise from the same business transition. A successor-liability claim asks whether the new entity should bear the predecessor’s existing liabilities under one of Florida’s recognized exceptions to the general rule of nonliability. A Chapter 726 claim instead focuses on whether particular assets were transferred under circumstances making the transfer voidable and what remedies are available against the transferee or transferred property. The distinction matters because the theories involve different elements, procedures, and potential remedies.
Proceedings Supplementary Can Reach Property Held by the New LLC
Section 56.29, Florida Statutes, provides Florida judgment creditors with proceedings supplementary to assist in locating and applying assets toward an unsatisfied judgment. The statute can become particularly important when property belonging to the judgment debtor is held or controlled by another person or entity.
Under Section 56.29(2), the creditor may identify nonexempt property of the judgment debtor in another person’s possession, or a debt or other obligation owed to the judgment debtor, and seek a Notice to Appear. The property must be described with reasonable particularity, and the third party receives an opportunity to assert defenses, conduct discovery, and obtain a jury trial on the right to the property where applicable.
This procedure can be relevant where the new LLC is using property that remains owned by the judgment debtor, owes money for assets it acquired, or otherwise possesses identifiable debtor property. The distinction between property that still belongs to the debtor and property that was actually transferred becomes important because different provisions of Section 56.29 may apply.
Fraudulent Transfers Require Their Own Analysis
Where ownership of an asset was transferred from the judgment debtor to the new LLC, Chapter 726 may provide a separate basis for recovery. Section 56.29(9) permits claims concerning the judgment debtor’s assets under Chapter 726, and the statute provides that claims brought by supplemental complaint under that subsection are subject to Chapter 726 and the rules of civil procedure. How far that limitation reaches, and in particular how it interacts with the separate remedy in Section 56.29(3), is unsettled among Florida’s district courts of appeal and is pending before the Florida Supreme Court.
Section 726.105(2) identifies factors relevant to actual intent. They include whether the transfer was to an insider, whether the debtor retained possession or control of the property after the transfer, whether the debtor had been sued or threatened with suit before the transfer, whether the transfer was of substantially all of the debtor’s assets, whether the value received was reasonably equivalent, whether the debtor was insolvent or became insolvent shortly after the transfer, and whether the transfer occurred shortly before or shortly after a substantial debt was incurred.
A transfer for little or no consideration can be especially significant when the same owners continue using the property through the new company.
The remedy nevertheless must remain connected to the transfer and the party against whom relief is sought. Chapter 726 does not simply make everyone who participated in a transaction liable for the judgment. Florida law distinguishes the transferee or beneficiary of a voidable transfer from a person who merely assisted in making it.
Post-Judgment Discovery Can Build the Successor Liability Record
These cases often turn on evidence developed after judgment rather than information available from public corporate filings alone. A deposition in aid of execution can address when the new company was formed, why operations shifted, which employees changed employers, what happened to existing equipment, whether receivables or contracts moved, what consideration was paid for transferred assets, and whether the original company continued conducting meaningful business.
Bank records can be equally important. They may show where customer payments were deposited before and after the transition, whether money moved between related entities, whether the new company began paying obligations associated with the predecessor’s assets, and whether the original debtor stopped receiving revenues after collection activity began.
The objective is to reconstruct the transition rather than merely establish that two entities are related. Common ownership alone does not automatically create successor liability, nor does performing the same type of work. The evidentiary record may therefore need to establish how the business transitioned, what assets or value moved with it, what remained with the judgment debtor, and whether those facts satisfy one of Florida’s recognized grounds for successor liability.
Moving the Business Does Not Necessarily Leave the Judgment Behind
Forming a new LLC after a judgment does not automatically make the new company liable for the old company’s debt. Florida law respects separate corporate entities, and a creditor still must establish the factual and legal basis for reaching the successor or its property.
The creation of a replacement entity also does not necessarily end collection. Where the evidence shows continuity of ownership, management, employees, operations, and assets, successor liability may become part of the enforcement analysis. Where identifiable debtor property remains in the new company’s possession, proceedings supplementary may allow that property to be reached. Where assets were transferred to the new entity under circumstances prohibited by Chapter 726, fraudulent transfer remedies may provide another route to recovery.
These theories should be analyzed separately rather than treating the creation of the new LLC itself as proof of liability. The relevant questions include how the operating business transitioned from one entity to the next, what property or value moved with it, what the predecessor received in return, and whether those facts support successor liability, recovery of particular transferred assets, or another post-judgment remedy.