A Florida LLC operating agreement is an agreement made between the members of a limited liability company or LLC in the state of Florida, which includes the financial and operational management details of a company. Unlike the LLC formation agreement, the Secretary of State does not need to be provided with the operating agreement.
The names of the members of the LLC are mentioned in this agreement and their share in the LLC. The legal entity of the company and its taxation, as well as profit and loss distribution between members, is also mentioned. An operating agreement is needed when setting up an LLC in Florida.
Who Takes the Florida LLC Operating Agreement?- People Involved
A Florida LLC operating agreement is drafted when a business is operated as a limited liability company. When forming an LLC in Florida, the members of the LLC need to draw up this agreement, which mentions the names and share of each member. The operational details and profit and loss distribution are included.
Purpose of the Florida LLC Operating Agreement- Why Do You Need It?
A Florida LLC operating agreement is required while setting up an LLC in Florida. The members of the Florida limited liability company get into this agreement to set out the shares of each member. The distribution of profits and losses between the members is decided and incorporated into this agreement.
This agreement is required when buying real estate, financial support from accounting and tax professionals, or for partners and potential investors in the company. The financial and operational aspects of the business are included in such agreements. In case of a legal case against the entity, a copy of the operating agreement would be required by the court.
Contents of the Florida LLC Operating Agreement – Inclusions
A Florida LLC operating agreement must include the names of the members of the limited liability company as parties to the agreement.
It must also include the effective date of the agreement, a certificate of formation or articles of association to be provided by the members indicating that an LLC was formed, the registered office and registered agent of the LLC, the members voting rights, the concept of perpetuity, the business being conducted through the LLC, the location of the business, the initial contributions made by each member, how the profits and losses will be utilized, how distributions of profits will be made, the way the managers will operate the company, the powers of the managers and members, maintenance of records, the fees to be paid to the managers and the rights of the members.
The agreement will also contain provisions for any amendments and events leading to the dissolution of the agreement.
How to Draft the Florida LLC Operating Agreement?
While drafting an agreement, the following points need to be kept in mind:
- Names: The names of the parties to the agreement as well as the relationship between them
- Identifying information: The registered office of the limited liability company
- Statement of Intent: This states that the agreement is in keeping with the LLC laws of Florida
- Business purpose: The nature of the business for which the LLC is being formed
- Term: The duration of the LLC
- Tax treatment: Whether the company will be a single-member LLC Florida or partnership
- Capital contributions: The capital contributions of members in cash or services
Before a Florida LLC operating agreement is drafted, there are certain issues which need to be negotiated like the tax treatment of the entity, how the members want to hold their interest in the company, will the managers be the decision-makers, how will deadlocks be resolved and the contributions versus the returns.
Benefits and Drawbacks of the Florida LLC Operating Agreement
The benefits of having this agreement are mentioned below:
- The necessary formalities which are required to be complied with will be observed
- There will be an avoidance of management disputes and deadlocks
- You will not be governed by the laws of the state
- A non-compete clause will prevent members from competing with the LLC and causing losses
- There will be an amicable resolution of member withdrawal and dissociation
- Members liability is limited to their shareholding
- Revenues received by members are greater than their ownership
- An LLC can be formed by a single person but can have unlimited members
The drawbacks of having this agreement are as follows:
- You cannot pay wages to yourself
- There are high renewal fees for such companies
- An extremely high capital values tax is payable on such companies
- Investors funds may go to corporations resulting in problems with raising capital
What Happens in Case of Violation?
When there is a violation of any clause in this agreement, which lays down the penalties for violation, if there is a breach of contract(1), then it may lead to termination of employment or being suspended for a certain period of time or expulsion. If a distribution made to you was not included in the agreement, then you become personally liable to the LLC to the tune of the assets or money received. In case the violation(2) relates to money or property to be invested in the company, your share in the company would be reduced accordingly.
When you want to set up a limited liability company in Florida, a Florida LLC operating agreement is required. By registering the LLC in Florida, your LLC can be located through the Florida secretary of state entity search. You will get greater customer access and be able to expand your business further.