By: Barry E. Haimo, Esq.
December 29, 2016
Who Are the Parties in a Limited Liability Company?
So you want to start a business and are thinking about forming a limited liability company (LLC). LLCs give their members the benefit of pass-through taxes in addition to providing a certain level of personal protection from creditors. Click here to read more about the formation and the benefits of an LLC.
If you’ve decided that an LLC is the way for you to go, you may be asking yourself who else can get involved. Even though Florida has some requirements as to who can be involved in a limited liability company for it to be recognized in the state, the formation of an LLC is fairly flexible.
The following parties and roles should be considered when forming an LLC:
Members. When most people think of the parties a limited liability company, members are the main group that comes to mind. Like shareholders of a corporation, “Members” are the owners of an LLC.
Depending on the state where the LLC is formed, an individual can be the only member of an LLC, multiple people can sign on as members, and even other businesses or LLCs can be considered “members” of an LLC. Multi-member LLCs are more common than single-member LLCs in Florida, but both are allowed.
There is one major difference between the two structures. Creditors have more power to go after owners of a single-member LLCs than they have to go after owners of multi-member LLCs.
If the owner of a single-member LLC owes a creditor and does not pay in the allotted amount of time, the creditor may get a judgment against the debtor and may pursue the LLC’s interest to be sold at a foreclosure sale. The creditor can then acquire ownership of the LLC and do whatever he or she wants with it.
Since many people have ownership over multi-member LLCs, there are restrictions as to what can happen if a member owes money to creditors. Creditors may get a charging order that will hand over the interest or profits the debtor makes through the LLC, but this is merely a right to receive financial benefits rather than ownership interests in the LLC as a whole.
Managers. When assigning the parties and their responsibilities, you must consider what kind of LLC you want to run. If all members want to be actively involved with the management of the LLC, then you will want to go with the more common “member-managed” LLC (this is the default form of management in Florida).
But if some of the members want to have a more passive role and management duties are assigned to only a handful of members or third parties, a “manager-managed” LLC would be more appropriate. Managers are typically members that take on the duties of running the LLC (although non-members can also be hired as managers).
The Registered Agent. A registered agent is required for all LLCs formed in Florida. Registered agents accept papers on the LLC’s behalf if the LLC is served with a lawsuit. This can be an individual (including an owner or manager) or a separate business entity. The registered agent just needs to have a physical Florida address and must give this address to the state when the LLC is being formed.
For more details on the roles in a limited liability corporation, contact a knowledgeable Florida business planning attorney.
Barry E. Haimo, Esq.
Strategic Planning With Purpose
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