When it comes to running a business with multiple owners, there are many decisions to be made. These decisions should not just be vocalized, but written down so they can become legally binding. A Florida LLC Operating Agreement is the necessary governing document that provides for all of the agreed-upon roles, rights, and duties of each LLC member in one place. This article discusses LLC operating agreements because the limited liability company is the most popular form of business entity created today. The concepts discussed here regarding the LLC operating agreement are equally applicable to corporations (the shareholders agreement and bylaws) and partnerships (partnership agreements).
Our attorneys at The Frazer Firm know first-hand how important LLC operating agreements are. Today, we will be explaining what they are, what to put in them, and what happens when they are broken or changed. Do not find yourself starting a company, even with your best friend, without a governing agreement in place! Call The Frazer Firm today at (561) 295-1551 for a free consultation.
What is an LLC Operating Agreement?
LLC operating agreements are a contract that covers how business owners (called members) will decide, in advance, how to handle certain situations. This includes determining the rules, rights, and duties of each partner. Operating agreements are always amendable at a later date and time, as ongoing circumstances or conditions can change.
Of course, no one ever goes into a business partnership expecting arguments, disagreements, or conflict. In Florida, if there is no operating agreement and a dispute occurs, the Florida Revised Limited Liability Company Act will be the default agreement, and it may be contradictory to what the members originally wanted.
What to Put in an Operating Agreement
An operating agreement in Florida is not legally mandatory in establishing an LLC, although it is a very important step that should not be left out. However, when owners do agree to form an LLC and the operating agreement is completed and signed by all owners, it will be a legally binding document.
Some of the most common things that should be included in an operating agreement are:
- Each owner’s contribution to the company
- How profits, losses, and draws are allocated
- Percentage of ownership
- Whether the company will be managed by the owners (members)
- Management duties and authority
- Voting rules for decision-making/control
- How new members are admitted
- Instructions for handling the death, withdrawal, or bankruptcy of a member
- How disputes are to be resolved
What to Do When the Agreement is Broken?
There are many reasons why an operating agreement is breached or broken. Not all these reasons are ill-intended or malicious either; sometimes the members inadvertently do things that are contrary to the agreed procedures or authority in the agreement. Other times, a member intentionally breaches the agreement and asserts authority they don’t have or takes action that is not permitted by the agreement.
If the company is not governed by a written operating agreement, or it is not comprehensive enough to address the member’s conduct or direct the resolution of the dispute, then the Florida Revised Limited Liability Company Act governs how the dispute is addressed and resolved —which may not be the best answer for you or the business. However, a comprehensive operating agreement prepared by an experienced business attorney will govern appropriate conduct of the members and manager of the LLC and will provide concrete guidelines for the resolution of disputes and the remedies for breach of the operating agreement as the owners originally intended.
An experienced business attorney at The Frazer Firm will review your Florida Operating Agreement –or lack thereof – provide counsel to you and your business, and guide you through the next steps so that you can have peace of mind and focus on operating and growing your business.
Contact The Frazer Firm Today
While you may never expect your company to need legal help, especially when it comes to your partners, many things can change and cause unexpected disputes.
The Frazer Firm specializes in business law and can help you and your partners create your company’s comprehensive governing agreements. We can also work on behalf of the business or business owner to resolve and litigate, if necessary, if the governing agreement has been breached.
Call us today at (561) 295-1551 for a free consultation and to see how our attorneys can best prepare your operating or other governing agreement and keep you and your business legally sound.
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