A limited liability company (LLC) is the most popular entity in Florida, with twice as many filings as those for corporations every year since 2015. LLCs are popular because of their flexibility regarding tax status and reporting duties.
To form an LLC, you must file the Articles of Organization with the Florida Department of State Corporations Division. Although an operating agreement is not required, it is recommended that you adopt one with the help of an experienced attorney. If you are considering forming an LLC, a Florida operating agreements lawyer at Sparks Law can further explain the benefits of having this document in writing.
A written LLC operating agreement is essentially the company’s roadmap, detailing how the business will conduct its operations and settle future disputes. These legal documents should cover several issues, including but not restricted to:
Additional terms could include protocol for how new members are admitted, the choice of either pass-through or corporate tax status, and a business’s mission statement.
Because Florida does not require a written operating agreement, members may believe it is not important. It may seem easy to verbally agree about how the company is run, but this can be a huge mistake. Members will inevitably quarrel, and misunderstandings can easily lead to litigation.
If misunderstandings arise and the members cannot agree on how they planned to resolve the issue, Florida law will prevail. This means that if the members’ capital contributions are not equal, the law may put members who contributed the most at a disadvantage.
For instance, if Member A contributes $75,000 in cash, and Member B contributes $25,000, it is probably the parties’ intent that Member A owns three quarters of the business and Member B one quarter. Without an operating agreement to mitigate a misunderstanding, Florida law could allocate ownership as fifty-fifty.
The same problem would occur when it comes time to allocate profit. With no operating agreement, Florida law could allocate equal profit distribution to all members for tax purposes. As such, those creating an LLC should work with a local attorney on an operating agreement that will protect them from future misunderstandings.
Sole members may choose the LLC vehicle for the same reasons multiple members might: tax benefits and protection from liability that a sole proprietorship cannot afford them. If the sole member wishes to admit others in the future, the procedure can be documented in an operating agreement, which can be revised at any time. A skilled operating agreements attorney at Sparks Law can help Florida clients understand their options and create the necessary documents.
If you have decided to form your business as a limited liability company, you are in good company with many Florida businesses. There are various filing requirements for starting an LLC, and although an operating agreement is not one of them, it is highly advised for your company’s success.
This agreement spells out exactly how your LLC will operate, which can go a long way in mitigating future problems. A Florida operating agreements lawyer at Sparks Law can help create a document that addresses your specific needs and concerns, so call for your initial consultation.