Key Takeaways

  • Florida LLCs must choose between member-managed and manager-managed structures.
  • The Florida Revised LLC Act removed the concept of "managing member"; these LLCs are now classified as member-managed unless otherwise specified.
  • A manager-managed LLC allows one or more designated managers (who may or may not be members) to handle daily operations.
  • The choice between member-managed and manager-managed impacts decision-making authority, liability exposure, and operational control.
  • A clear, written operating agreement is crucial to define roles, responsibilities, and decision-making processes in either structure.

A managing member LLC Florida is a member of an LLC who has been assigned by other members with the task of managing the company. However, the Florida Revised Limited Liability Company Act has removed the concept of managing member. All managing member-managed LLCs are now deemed to be member-managed.

Managing a Florida LLC

When creating an LLC or a limited liability company in Florida, you must decide whether it will be a member-managed company or a manager-managed. An LLC functions just like a corporation but with a different management structure.

Owners of an LLC are called its members, and you can either form a single-member LLC or a multiple-member LLC in Florida. Different tax treatment applies to different types of LLCs. Hence, it's important to decide on the management structure of your company.

In a member-managed LLC, all members participate in the business of the company. Each member has a right to take decision on behalf of the company. However, certain important items like business contracts and financial agreements must be made with the approval of the majority of members.

If no management type is specified by an LLC, the state considers the LLC to be member-managed. Management by members is more common among small LLCs like the one being operated by a husband and wife, where it does not make much financial sense to hire an external manager.

Members of a manager-managed LLC delegate their decision-making power to one or more managers, who may be assigned from outside or from within the members themselves. In some cases, you can even have another LLC or a corporation as your company's manager, provided your state does not prohibit such appointment.

Irrespective of the type of management you choose, you should have a detailed operating agreement to set out the day-to-day functioning of the company and the procedures for making business decisions. If your company is to be managed by one or more managers, you should clearly spell out the roles of each manager in the operating document. This document should include rules and procedures for selecting managers, their resignation and removal, the course of action to be followed in the case of a dispute, and other matters necessary for smooth functioning of the company.

Since disagreements in management are quite common, it's advisable to consult an experienced business attorney while preparing your company's operating agreement.

Choosing Between Member-Managed and Manager-Managed Structures

When forming an LLC in Florida, one of the most critical decisions is selecting the company's management structure. Florida LLCs may operate as either:

  • Member-Managed LLC: All members share equal rights in managing the business and making key decisions. This structure is typical for smaller businesses where owners prefer hands-on involvement.
  • Manager-Managed LLC: Members appoint one or more managers to oversee operations. These managers may be members themselves or third parties.

Under the Florida Revised Limited Liability Company Act, if the LLC's operating agreement or Articles of Organization do not specifically state that the LLC is manager-managed, it will default to member-managed. The Act has eliminated the "managing member" concept—meaning even if one member primarily handles management, the LLC remains member-managed unless formally designated otherwise.

Pros of Member-Managed:

  • Simple governance structure.
  • All members participate directly.
  • Suitable for smaller LLCs or family-run businesses.

Pros of Manager-Managed:

  • Delegates daily decision-making to designated individuals.
  • Helpful when members are passive investors.
  • Allows hiring professional, external managers if needed.

Florida Revised Limited Liability Company Act

Florida Revised Limited Liability Company Act (referred to as the "New Act") came into effect from January 1, 2014. The New Act is codified as Chapter 605 in the Florida Statutes.

The old Limited Liability Company Act, codified in Chapter 608, was repealed with effect from January 1, 2015. After this date, all LLCs formed or registered in Florida are governed by the New Act, irrespective of their date of formation or registration.

The New Act is primarily based on RULLCA or the Revised Uniform Limited Liability Company Act, which has been adopted by several states and is being adopted by many others. One major advantage of having RULLCA-based law is the uniformity in treatment across different states and added clarity from court decisions.

The New Act has also retained several provisions from the old Act and incorporated several concepts from other statutes. It intends to make Florida an attractive place for operating LLCs.

The New Act has removed the concept of managing member that existed in the old Act. All LLCs managed by a managing member are now considered as member-managed. Unless otherwise provided in an agreement, members of a member-managed LLC cannot receive compensation from the company for their services, the only exception being in the event of services provided for winding up the company. However, a member is entitled to reimbursement of funds advanced to the company.

An LLC, through its operating agreement, may elect to be manager-managed. It may also make such election in its articles of organization. If an LLC does not expressly choose to be manager-managed, the rules applicable to a member-managed LLC apply to it by default.

Voting Provisions

  • The votes of each member of a member-managed LLC carry weight in the percentage of his or profits interest in the company.
  • All decisions in a member-managed LLC must be approved by members having a majority of the profits interest.
  • A member transferring all of its transferable interest continues to exercise its voting power based on the percentage of profits interest it would have in the absence of the transfer.
  • Managers may take decisions through unanimous written consent or through proxy votes.

Rights and Duties of Managers and Members

Whether an LLC is member-managed or manager-managed in Florida affects the duties and rights of those involved in company operations.

Duties of Managers in a Manager-Managed LLC:

  • Fiduciary Duty: Must act in good faith, with loyalty and care, prioritizing the LLC’s interests.
  • Duty of Loyalty: Avoid conflicts of interest and self-dealing.
  • Duty of Care: Exercise reasonable business judgment and diligence.
  • Obligation to Follow Operating Agreement: Managers must operate within the scope defined by the LLC’s governing documents.

Rights of Members:

  • Information Rights: Members are entitled to inspect records, even if they are not managers.
  • Voting Rights: Members may retain certain voting powers for major decisions like dissolving the company or amending the operating agreement.
  • Profit Sharing: Members retain their economic interests regardless of management structure.

It is recommended to clearly define these roles in the LLC’s operating agreement to prevent disputes and misunderstandings.

Frequently Asked Questions

  1. What does managing member mean in a Florida LLC?
    Florida law no longer formally recognizes the term "managing member." Instead, LLCs must be designated as either member-managed or manager-managed. A "managing member" would generally refer to a member who actively manages a member-managed LLC.
  2. Can a Florida LLC have both members and managers?
    Yes, in a manager-managed LLC, members may appoint managers. These managers can be members themselves or external individuals or entities.
  3. How do I know if my Florida LLC is member-managed or manager-managed?
    Check your LLC’s Articles of Organization or operating agreement. If it explicitly states "manager-managed," then the LLC operates under that structure. Otherwise, the LLC defaults to member-managed.
  4. What happens if the operating agreement does not mention management structure?
    If no management structure is specified, Florida law defaults the LLC to being member-managed.
  5. Can an LLC change from member-managed to manager-managed later?
    Yes, an LLC can amend its Articles of Organization and operating agreement to switch from member-managed to manager-managed, or vice versa.

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