FL LLC Operating Agreement: Everything You Need to Know
The FL LLC Operating Agreement is an important document for all Florida Limited Liability Companies to draft as it is highly beneficial for the LLC owners.3 min read
2. Purpose of the Florida Operating Agreement
3. Importance of the Florida Operating Agreement
The FL LLC Operating Agreement is an important document for all Florida Limited Liability Companies to draft. While the State of Florida doesn’t require that such LLCs draft an operating agreement, it is highly beneficial for the owners of the LLC to have. LLC owners, also referred to as members, can operate the LLC as they choose. If drafting an operating agreement, it can be either oral or written.
Keep in mind that if you choose to have oral and written provisions incorporated into your LLC, then any issues that may arise will ultimately result in the use of the written provisions as opposed to oral agreements. You can draft an operating agreement at any time, whether it is before actually forming your LLC, immediately thereafter, or even any time during the life of the business.
Operating Agreement: Defined
The Florida Operating Agreement will specify how the LLC will be managed both financially and operationally. This document need not be mailed to the Florida Secretary of State’s office. Rather, it is an internal document that is drafted and kept on file while the LLC is in is business. Keep in mind that, when there is no operating agreement, the Florida statutes will apply. Such rules might not provide the best outcome for your business.
Furthermore, if any decision-making processes are not in writing, Florida law indicates that this can lead to various interpretations of what the members have actually agreed upon. This can cause conflict amongst members, particularly if a legal dispute arises.
If you do choose to draft an LLC Operating Agreement for your Florida LLC, there is no requirement for it to be notarized. You can simply print out the agreement, have all members sign it, give a copy to all members, and keep an additional copy on file.
Purpose of the Florida Operating Agreement
The main purpose of the Florida Operating Agreement is to identify the responsibility of each member, along with the percentage of ownership that each member has. The agreement will also specify how the business is managed, how taxes will be paid, how profits are distributed to the members, and how losses will be reported for tax purposes.
Certain significant items to be included in the agreement include the following:
- Membership names/addresses
- Registered agent name/address
- The purpose of the Florida LLC
- The term of the Florida LLC
- How new LLC members will be admitted
- The principal place of business
- Distribution of the LLC’s assets to all members
- Specific duties of all members
- Accounting method, i.e. tax software tools, hiring of an accountant, ec.
- Voting rights, and if voting on certain decisions will require 100% approval or if a majority of the members must approve before a decision can be made
- Voluntary withdrawal of members, i.e. how a member can withdraw and if the member will have to sell his or her membership interest to an existing member or if it can be sold to a new member
- What happens if a member dies
- What happens if some sort of breach occurs, i.e. breach of contract or if a member fails to do his or her job in terms of what he or she is responsible for
Importance of the Florida Operating Agreement
The Florida Operating Agreement is important for several reasons. One specific reason is the protection of membership limited liability. The agreement can be used in court to provide evidence as to how the LLC will be managed, along with the process that was put in place for certain events that could take place during the life of the LLC.
Specifically, the agreement could prevent certain events from triggering an appraisal. There are certain events that take place that usually triggers some sort of appraisal rights, including the following events:
- Sale of assets
- Conversion of business structure, i.e. LLC conversion to a corporation
Any one of these above events could give the dissenting members the option to sell their membership interest. If, however, the Operating Agreement specifies the process of what happens during these events, any dissenting members might not be able to sell their interest in the business.
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