Florida LLC owners – Time for a legal checkup!

Many owners (more properly referred to as “members”) of Florida LLCs are unaware of the rather sweeping changes in Florida’s LLC Act that were adopted into law in 2013.  These changes in the law are a good reason for an LLC owner to review the business’ articles, operating agreement and other legal documentation – especially if the LLC has multiple owners.   
The following is a very brief overview of just some of the new act’s provisions.
The new act became effective on January 1, 2014 and while the provisions of the act only apply immediately to LLCs newly formed or registering to do business in 2014, the act will apply to ALL Florida LLCs on January 1, 2015.  Also, LLCs formed prior to 2014 can elect to adopt some of the Act’s provisions prior to 2015.
No more “managing member.”
Under previous Florida law it has been possible for the owners of an LLC to designate one of its members to serve as “managing member,” and empower that “managing member” with considerable rights to take actions on behalf of the LLC.  However, under the new act the term “managing member” is eliminated.  The elimination of that term has several consequences for existing LLCs that continue to use it:
  • It is not assumed that the continued use of the term “managing member” by the LLC means that the LLC is manager-managed by the designated member.

  • Consequently, the LLC runs the risk of being considered as member-managed, with all members having apparent authority to manage and bind the LLC

Accordingly, it would be wise for LLCs currently established as having a “managing member” to seek legal advice regarding the possible need to amend the business’ operating agreement and any other affected documents.

LLC owners cannot waive certain provisions of the Act.
The new act is what is know as a “default statute,” which means that if the owners do not have an operating agreement, or if the operating agreement is silent regarding something contained in the act, then the provisions of the act apply to the LLC’s operations.  What it also means is that the owners can decide in LLCs operating agreement to override some of the act’s provisions. 
However, the act specifically states certain things that the owners of a LLC cannot override or waive, including:
  • The right of an owner to disassociate from the LLC (but the owners might want to seek legal counsel in framing the consequences of any such disassociation)
  • The duties of loyalty and care, and to act in good faith
  • The ability of the LLC to sue and be sued in its own name
  • The right of an owner to reasonably take action to enforce or protect the owner’s interest
  • The right of an owner to reasonable access to certain LLC records
  •  The owners may not relieve a person from liability for actions performed in bad faith, showing intentional misconduct or intentionally in violation of law. 
This is but a tip of the iceberg of the changes in Florida’s LLC Act.  The new act includes additional changes to, among other things:
  • Important definitions
  • Operating agreement provisions
  • Registered agents and service of process
  • Formation and filing requirements
  • Becoming a member and contributions; and
  • Distributions

Suffice to say that legal review of all LLC formation, operational and amending documents should rank high on the to-do list of LLC owners during 2014.

Paul Arrington worked at the U.S. Small Business Administration for over 20 years and worked his way to become District Counsel in the SBA Jacksonville District Office.  In 2006, Paul became the Procurement Technical Assistance Center Manager at the Jacksonville Regional Chamber of Commerce where he helped businesses get contracts with governmental agencies.  Paul joined the SBDC at UNF in Jacksonville in 2008 to become a consultant and Director of Micro Enterprise Development.

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