The State of Florida does not require business owners to have a written operating agreement for their limited liability companies (LLCs). This does not mean, however, that you shouldn’t have one on hand.
An operating agreement is extremely valuable and can prevent significant problems once the business is up and running. Should any questions arise about a company’s operations and management, especially considering unpredictable disasters, owners and their attorneys can turn to their operating agreement for answers.
Drafting an Operating Agreement
Operating agreements are legal documents that govern a company’s operations and management. The operating agreement outlines expectations and highlights the structures and rules that apply to the company’s members, managers, and employees.
LLC owners can use a written operating agreement to detail:
- Ownership: treatment of membership interests (called “shares” in corporations)
- Management: whether the members or outside managers manage the company
- How to handle disputes between members and how to terminate managers
- Tax issues
It is in the best interest of the LLC and its owners to ensure that an operating agreement is prepared with the aid of a Florida business lawyer. Corporate counsel can ensure that the operating agreement provides appropriate legal protections while also promoting the LLC’s flexibility.
In the Absence of a Written Operating Agreement, the Florida Statutes control
In the absence of a written operating agreement, Ch. 605 of the Florida Statutes encompasses the Revised LLC Act (“Revised Act”) which governs the management, ownership, and operations of a Florida LLC. Also, to the extent that an operating agreement is silent on a particular issue involving the LLC, the Revised Act controls. While the Revised Act was drafted with fairness in mind and adopted many of the provisions of the Revised Uniform LLC Act (“RULLCA”), it is always preferable to have a written operating agreement specifically tailored to the interests of the owners and the company.
It is also more complicated to resolve disputes if a business does not have a written operating agreement. While verbal contracts are enforceable in court, they are difficult to establish because the parties typically dispute key material terms. It is much easier to resolve disputes and manage the company with a unique and detailed operating agreement.
Additional Provisions to Consider
There are, however, some statutes in the Revised Act cannot be altered or waived in a written operating agreement. For example, the LLC and its members and managers have a duty of good faith and fair dealing and a duty of loyalty and care. Moreover, the operating agreement cannot exonerate members or manager from liability for conduct involving bad faith, willful or intentional misconduct, or a knowing violation of law.
Securing a Written Operating Agreement in Florida
Written operating agreements are very important to the orderly management and operation of an LLC business entity. It helps protect an LLC against costly and time-consuming litigation, and it helps the company better respond to the needs of their owners, managers, employees, and third parties.
Entrepreneurs, existing LLC business owners, and other business owners interested in converting their existing business entity to a Florida LLC should reach out to the experienced business attorneys at The Frazer Law Firm. We can draft a unique, specifically tailored, and protective operating agreement for your LLC. Reach out today to schedule a consultation and learn more about how to protect your business.
Nobody forms a business partnership with the expectation that it will all fall apart one day in the future. Nonetheless,…