10 Things You Should Know If You Are Currently Operating a Florida Limited Liability Company (“LLC”)

By: Suzanne Arbide, Commercial Litigation, Civil Litigation, Business, Consumer Finance, Corporate, and Contract Attorney

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Florida overhauled its limited liability company statute on January 1, 2014, with significant changes.  Ignoring the changes could put you at risk.  If you are currently operating a Florida Limited Liability Company (“LLC”), here are 10 things you should know:

  1. The new Florida statute (Chapter 605) creates new concepts, closes loopholes and modernizes the law. But it also creates potential personal liability.

  2. All LLCs that have been in business in Florida since before Jan 1, 2015, have had the entire year of 2014 to get their affairs in order to be ready for the new act to apply. As of 2015, all LLCs have to abide by the new act.

  3. Any Operating agreement or Articles of Organization that uses the term “Managing Member” must be reviewed without delay, because the new law overrides Operating agreements that provide that a Managing Member can act without the consent of a majority-in-interest of members. Thus, many Managing Members will find that the authority they were granted no longer applies.

  4. The new law completely abolishes the concept of “managing-members” in Florida. Under Florida’s prior LLC laws, an LLC that was member-managed (i.e. managed by its members, as opposed to managers) could choose to elect one or more members as “managing-members” and only those managing-members would have special rights to control the LLC.

  5. The new law changes the “managing-members” form of management and does not recognize the “managing member” concept and, instead, recognizes only “member management,” where each member has the management and decision-making authority, or “manager management,” where decision-making authority is delegated to one or more individuals without the requirement of that manager being a member of the LLC. It is imperative that any LLC with “managing-members” structure be changed to one of the other recognized management structures. This issue affects who has the power to act for the LLC, such as executing a contract and borrowing money.

  6. The new law provides that a member may dissociate at any time by withdrawing by “express will” regardless of whether this is allowed by the operating agreement. Before, a member could not dissociate at all prior to dissolution or winding up, unless authorized in the articles of organization or operating agreement. With the new law, this is no longer the case.

  7. Under the new law, if a member dissociates from an LLC prior to winding up: (1) the member’s right to participate as a member in the management and conduct of the LLC’s activities and affairs terminates; (2) if the LLC is member-managed, the member’s fiduciary duties of loyalty and care to the LLC and its other members terminate; and (3) the member retains his or her right to receive distributions from the LLC.

  8. Under the new law, a member who wrongfully dissociates is liable to the LLC and to the other members for damages caused by the dissociation and the LLC may have the right to damages against a member who wrongfully dissociates.

  9. Unlike sole proprietorships and partnerships, LLCs can survive beyond the deaths of their owners.

  10. Whether an LLC survives beyond the deaths of its owners is determined by its operating agreement.

 

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