By: Barry E. Haimo, Esq.
October 13, 2016
What Are the Governing Documents for an LLC?
If you already have or want to create an LLC, you should know that Florida has laws regarding governing documents for these types of business ventures. What kinds of documents do you need?
To be recognized as an LLC by the state, a registrant must file Articles of Organization with the Florida Division of Corporations. The default rules apply if there is no operating agreement. While an operating agreement is not required, it is strongly recommended, especially if more than one person is involved in creating the LLC.
Below, we’re going to go over both types of documents.
Articles of Organization.
This is a document that lists all of the basic (but important) information that creates your LLC. Articles of Organization include the following:
- Company Name
- Statement of Purpose/Mission Statement
- Duration (perpetual or otherwise)
- Place of Business (location of headquarters)
- Registered Agent
- Management (whether the LLC is member-managed or manager-managed)
Articles of Organization are pretty standard, but if you want to avoid any problems in the future, it is always helpful to have an experienced lawyer draft them or at least take a look before you submit them to ensure there are no errors.
The operating agreement will be tailored to your business’s needs. While there are boilerplate documents available, but they do not do you much good. The operating agreement will outline each partner’s roles and responsibilities, address allocations of profits and losses and distributions to partners, managerial processes and rules, voting thresholds, transfers of interests, noncompete and nonsolicitation prohibitions, and death and disability (to name a few important points).
Said differently, the basic provisions included in an operating agreement include:
- Each member’s percentage of ownership
- Each member’s voting rights (usually, but not always, determined by percentage of ownership)
- Allocation of profit and losses
- Specifics of member meetings
- Identification of manager(s)
- Roles and responsibilities of each manager
- Instructions for exiting members
- LLC procedures when a member exits
- Instructions for the dissolution of the LLC
What If There Is No Operating Agreement?
As mentioned above, operating agreements are not required by Florida law. However, they sure do come in handy when there is an inconsistency or dispute in the way the LLC is managed. If there is no operating agreement present and a dispute arises, the Florida rules will take over.
In 2013, the Florida Legislature passed the Florida Revised Limited Liability Company Act and it went into effect at the start of the next year. The act provides “default rules” for how LLCs are run. These default rules will be used if an LLC has not written an operating agreement, if the existing operating agreement does not address the issue at hand, or if the operating agreement violates current Florida law. (there are a handful of nonwaivable provisions).
It is extremely important to stay up-to-date with the limitations and policies regarding LLCs and operating agreements. The act we mentioned above is an important change in the way LLCs are managed, but it is not the last change to come: Florida is constantly altering its policies and laws regarding LLC management and the associated governing documents.
Consult an Attorney While Drafting Governing Documents
Ongoing changes to Florida law are just one reason to keep an attorney on speed dial while you are forming an LLC and drafting governing documents. A business planning attorney who has experience with how operating agreements should work for LLCs can help you draft an operating agreement within the limitations of Florida law that will still address a wide range of issues. Failing to retain an attorney may leave you quite surprised and fixing the problem will be more expensive than avoiding it in the first place.
Barry E. Haimo, Esq.
Strategic Planning With Purpose
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