Protect your Investment
Florida limited liability companies (LLCs) are governed by an Operating Agreement. And the law provides ample flexibility to tailor this document to fit your needs.
But most Operating Agreements we review are missing key ingredients. Make sure yours is up to par by adding (or adjusting) the following provisions. Still got questions? We’ve got answers.
VOTING
Most Operating Agreements you find online are outdated- especially with regards to member voting. Nowadays people do business over email, telephone, Skype, and even text message. And your Operating Agreement should reflect that. Otherwise, you’re either stuck with outdated formalities or you risk corporate liability. After all, a conflictive partner could contest the validity of decisions made over email or FaceTime, on the basis that such meeting wasn’t properly held. If you’re on-the-go, make sure your Operating Agreement reflects that reality. Protect yourself and your investment.
CONTRIBUTIONS
People always emphasize the percentage each member has in the company. But it’s equally critical to record the contributions each has made to the LLC. Why? First off (and mainly), for accounting purposes. LLCs maintain capital accounts for each member, and contributions are an important factor in that equation.
In addition, a proper record of financial contributions is vital when a company is dissolved. It will (partly) determine who gets what when the entity is wound-up. Check out our blog post on LLC taxation if you want to learn more.
In short, make sure your Operating Agreement has a Schedule or Exhibit that records the contributions each member has made, in what amount, and when.
MANAGEMENT
LLCs come in two flavors: member-managed and manager-managed. And the difference is right in the title. The business and affairs of the LLC are either managed by the members themselves (who vote on all matters) or they’re under the control of a manager.
The “default” rule is that your LLC is member-managed, unless, of course you do something about it. And this is an important point. If you don’t stipulate in the Articles of Organization or the Operating Agreement that your LLC is manager-managed, the State of Florida will assume the opposite. And this may have catastrophic implications for business owners who work with their partners on the “honor system”.
So check your corporate documents today and ensure they reflect the arrangement you’ve negotiated with your partners.
Still got questions?