If you are looking to start a business in Florida and want to structure as a limited liability company (LLC), one of the most important steps in the process is developing an operating agreement. An operating agreement is an internal document of the company that typically lays out certain key components and necessary procedures for the company’s operations.
An LLC operating agreement is sometimes called a “constitution,” and it is one of several important legal tools for LLCs in Florida. An operating agreement establishes the rules and responsibilities that all members in an LLC must follow and can help avoid internal disputes or misunderstandings among co-owners of the company at a later stage.
However, Florida law does not require an LLC to have a formal operating agreement. Without one, the understanding of what each member owns and owes will be established by default through state laws and courts if there is an internal dispute. One reason for this is that some members might not want to enter into a written agreement for fear that it might be used as evidence to “pierce the veil” and show that an LLC is actually a corporation.
While it may make sense for some entrepreneurs not to want their operating agreement to be used against them in such a way, not having an agreement can also create uncertainty regarding how an LLC will be governed and what rights its members will have, with the potential cost of losing the business. If there are no operating agreements in place, this uncertainty can force the members to establish rules and guidelines through trial and error. This can create problems when one member is forced to agree with decisions that they disagree with or when disputes arise over profits, responsibilities, or just about anything else.
If you need assistance creating an operating agreement for your LLC or want guidance on whether implementing one is a good idea for your company, you can speak with a Florida business attorney who can help you.
An operating agreement is a document that establishes the guidelines for how the LLC will be managed. It tells the members what they can and cannot do, as well as how major decisions are made. The good news is that it is not required by law to file your operating agreement with the state in FL. However, it must be available to members and potential investors upon request.
An LLC operating agreement should contain the following basic elements:
Understanding the purpose of your operating agreement is important because it will impact everything else in your company. It should describe what services you plan to offer, how you will offer them, and what your future goals are.
The members’ percentage interest in the business is self-explanatory. How profits will be distributed should also be included, because there are different ways to divide it up among the members. For instance, everyone can receive an equal share or you can do it based on capital contribution or hours worked. How capital is called, what those calls are based on, and how they will be made is also crucial information that can help your LLC run smoothly.
Finally, the procedures for taking a vote, which include voting methods and how many votes each member has, should be clearly detailed in your operating agreement, as well. This ensures that everyone’s voice is heard and allows for smooth decision-making.
Drawing up an operating agreement should not be overly difficult, and can save you a lot of headaches in the future. The cons to not having one in place, however, is that it leaves your LLC vulnerable to issues with lawsuits and members who may want out.
Typically, an operating agreement should include the following information and clauses:
The key component that will likely be different from other states is the management structure, which may include one manager or several managers, depending upon how many owners are in the company. With that being said, there are state-specific acts in place in Florida to protect the members in an LLC.
If you need assistance generating an operating agreement for your Florida LLC, contact a business attorney who can help you.
While having a lawyer create your LLC activity agreement is not required by Florida law and it is possible to draw one up on your own, it can be extremely beneficial to seek professional legal help. Doing so can protect you in the event of costly lawsuits and help to ensure your LLC is well-run. The document should be reviewed by a lawyer before it is implemented to make sure that you have included all necessary information.
In fact, it is a best practice to have an operating agreement drafted by a lawyer who focuses their practice on business law or you can contact your local bar association for referrals. With that being said, there are many online resources available for those who would rather do it themselves. There are also “dummy” forms that may be helpful in creating an initial document before meeting with an attorney. Contact us today to learn more about the services we provide to LLCs.