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The answer is almost always Yes! But why? And what even is an LLC Operating Agreement?
What is an LLC Operating Agreement?
Before we get into why you need one, we want you to understand what an LLC Operating Agreement is. An Operating Agreement is a legal document that outlines how your company will be run. It includes important information such as who handles day-to-day affairs, when unanimous or majority voting should be used, how profits and losses are distributed, how much salary is paid, etc. Basically, anything relevant to the business’ day-to-day and financial operations will be covered in an Operating Agreement.
Is an LLC Operating Agreement Required in Florida?
While the State of Florida does not require that you have an Operating Agreement for your Limited Liability Company (LLC), it is highly encouraged that you have one in most cases. Below are five reasons you should considering having an Operating Agreement for your LLC.
5 Reasons You Need a Florida LLC Operating Agreement
1. Govern Your Business by Your Own Rules – Not the State of Florida’s
If you don’t write how you want your business to operate, the State of Florida writes it for you. In other words, just because you don’t have an Operating Agreement doesn’t mean that your business isn’t governed by certain rules; it just may not be governed by your rules.
What if a Florida LLC doesn’t have an Operating Agreement?
When you don’t take the time to spell out how you want the LLC to operate, the Florida Revised Limited Liability Company Act tells you. This means you don’t get a say in some very important matters, such as who manages the day-to-day affairs of the business, when unanimous versus majority voting should be used, how profits and losses are distributed and the effects of a merger on you and the business.
Rather than be told how your business is going to operate, you have the better option of making this determination yourself in a well drafted Florida LLC Operating Agreement. Don’t leave important business decisions to lawmakers who weren’t necessarily thinking with your best interests in mind when writing the law.
2. Prevent Expensive Headaches Down the Line
Nobody is rich enough to buy cheap. Cheap car parts, cheap replacements – it all adds up and becomes awfully expensive.
If you don’t delineate exactly how your business is going to be run, not only do you risk that your business will run right into the ground, but you also risk spending too much time and money trying to dig it out. A well drafted, and specific to your needs Florida LLC Operating Agreement may very well prevent most, if not all, of these headaches from occurring.
Do things right the first time. Pay some money up front so you don’t pay endless amounts of money to fix the mistakes later. They are called start-up costs, they are tax-deductible, and they are worth their weight in gold.
3. Be Prepared for Major (or Disagreeable) Business Decisions
Everything is all roses and clovers until it isn’t. Entering into a business with partners and friends is exciting, the future is bright and your quibbles are typically minor. Always expect the best in your business endeavors, but be wise and also always prepare (just in case) for the worst.
Unfortunately, bigger and bigger disputes tend to arise in the course of running a business with multiple people and personalities involved. Major decisions as well as daily operational affairs may be subject to different viewpoints and ideas during both times of hardship and of extreme prosperity. Members may even want to sell or leave at some point!
An LLC Operating Agreement has the foresight to get the members’ agreement on how to address important issues whenever they may crop up. More importantly, it gets this agreement when the members still agree with one another, which saves every member time and money down the road, especially if it’s not all rainbows and sunshine.
4. Important Financial Matters Will Be Decided
Financially speaking, not only do you prevent expensive costs in litigation over adversarial disputes that arise when nothing is in writing and everything is up for interpretation, but your Florida LLC Operating Agreement may also be used to address other, important financial matters, such as the amount of capital needed to fund the LLC, when and how distributions will be made, how much salary is to be paid, under what circumstances to give business loans, etc.
This type of transparency keeps everyone on the up and up so there are no surprises.
5. You’ll Set Your Business Up for Success
It helps you and your business! You probably would refrain from investing in another business if you knew the owners were just going to wing it. Why? Because you would predict that such a business might fail. Anybody can technically be a business owner, but to be a successful business owner requires a plan, control and thought-out execution of goals.
A Florida LLC Operating Agreement poses questions you may not have thought about beforehand, and it also requires you to strategize, organize and come up with a standard way of operating.
How Do I Get an Operating Agreement for My LLC in Florida?
We hope that we shed some light on why it’s advantageous for your Florida LLC to have an Operating Agreement. That being said, we just met, and we don’t exactly know you or your business. We recognize that not all businesses are created equally and not all Florida LLCs may need an Operating Agreement, but why not consult our expert business attorneys in Clearwater, FL today to find out the best option for you and your business.