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An LLC Operating Agreement is a legal document that describes the ownership interests and member duties of your LLC and also provides vital information describing how the company will operate. This document allows your company to set out the financial and working relations among its business owners, known as “members” under LLC terminology, and between the members, any non-member managers in the LLC and outside individuals and entities.
If you’re starting an LLC in Florida, it’s wise to have an LLC operating agreement. Here’s what a Florida LLC operating agreement is and what it should include.
Do I Need an LLC Operating Agreement?
Generally, all Florida LLCs with more than one member should have an operating agreement. This document is invaluable despite it not being a legal requirement.
What Does an LLC Operating Agreement Do for My Company?
An LLC operating agreement establishes how key areas of a business will be handled including business operations, processes, and funds.
Operations: Describes the company’s operations
Business Formation: Assists in establishing the formation of a business entity
Business Processes & Voting: Outlines important processes and procedures to prevent uncertainties, disputes and added time down the road, such as how voting will be conducted for business decisions
Fund Distribution: Clarifies how the LLC start-up funds will be contributed and how profits and losses are distributed to the LLC members
Membership Changes: Creates a succession plan for the LLC stipulating who will manage the LLC in the event that current members are unable to do so
Business Separation: Establishes the separateness of the business from its owners/members for liability and tax purposes
The LLC operating agreement becomes incredibly useful as not only the members’ compass for operations but also to reassure members that the proper procedures are in place to safe-guard the business, its members and its assets.
Not to mention, matters of succession and liability are always crucial when establishing a small company. Without an operating agreement such as this, it may be much more difficult to show your business is separate from you, which may result in grave liability issues. If the reasons above didn’t convince you, we’ve outlined the top five reasons why you need a Florida LLC operating agreement.
Differences Between a Multi-Member and Single-Member LLC
Multi-Member LLC
A multi-member LLC is an LLC with more than one owner/member, and an operating agreement is crucial in setting up rules for ownership and business operations.
It aims to ensure that all members understand their rights and responsibilities by removing any ambiguities regarding the business’ management and internal operations. It outlines each member’s voting powers as well as the percentage of interest that each member holds in the business. In a multi-member LLC, an operating agreement will establish certainty in each member’s rights and duties and will be helpful in avoiding arguments and disputes in the course of the business.
Single Member LLC
With a single member LLC, it is natural to wonder if you really need an operating agreement to run your own business. However, although it may be significantly less complicated to run a single-member LLC, an operating agreement will assist in protecting your and your personal assets from business liabilities.
By establishing an LLC operating agreement, it will effectively demonstrate that your business operates as a separate and distinct entity from you, and will assist in shielding you from personal liability in your business transactions.
Can a Florida LLC Operating Agreement be Changed?
Yes, and it should be!
A business tends to go through many phases, each with its own unique set of circumstances and growing pains. An operating agreement should reflect current operations, management and structure – not the past. It isn’t a bible to be created then admired throughout time, but rather an operation’s manual to be used often, and sometimes daily, through the course of the business. As such, it should change with your business so that it remains sensible and useful for the members and the business.
If you have an operating agreement, but haven’t reviewed it in a while; then you should go through it section by section to ensure that it still fits your business purpose, and that you’re continuing to follow it as written. The agreement should clearly spell out the procedure for making amendments. Better yet, our office will gladly review your current agreement and make any necessary edits to ensure it matches up with your current wants and needs. Contact us today and we will review your Florida LLC operating agreement to ensure it’s aligned with your business needs.
Can I Add Members to my Florida LLC Operating Agreement Later?
Yes, with an LLC operating agreement in place, adding a member to a Florida LLC should be a very simple process.
An operating agreement should include a clear and established procedure for how to add members to your LLC, including the way membership must be voted on. Once you determine that you want to add another member, an amendment to the LLC operating agreement will outline the specifics of the new arrangement including the new ownership structure, percentage of profits, and new duties and rights if this was not covered in your initial agreement. These ownership percentages should be discussed with existing LLC members as well as the new member before arriving to an agreement and adding a member to the LLC.
After deciding new ownership structure and duties, you can then prepare an amendment to your operating agreement as stated earlier to add a new member to the LLC. This amendment will list the new member’s name, the capital contribution that the new member is making, the member’s percentage interest in the company, and the percentage of profits and losses that can be allocated to that member.
How Do I Get an Operating Agreement for My LLC in Florida?
However overwhelming creating an operating agreement may seem to be, you are not alone. While online services do exist to help you create an agreement, you will be much better off being served by an attorney. It’s important for small businesses to have attorneys rather than relying on online services and free document templates.
Call atCAUSE Law today at 727-477-2255 or contact us online to schedule an appointment and meet with an attorney who can tailor your LLC operating agreement to your specific needs, the requirements of the business you’re engaged in, and appropriate Florida and federal law.
Ashly Guernaccini
Ashly Guernaccini is the founding attorney of atCAUSE Law Office. With over a decade of experience in business law, Ashly is certain that good lawyering does not involve a one-size-fits-all approach. She’s an advocate for businesses of every size, whether it’s a small local business or a large corporation.
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