For those looking to form a corporate entity with pass-through taxation, no limitation on the number of members (owners) allowed, limited liability for the company’s debts, flexibility to structure management, fewer formalities than a corporation, and/or the ability to form subsidiaries without restriction, the formation of an limited liability company in Florida may be exactly what you need. Before deciding whether or not to take such a leap towards this next stage of planning a business, it is important to recognize and understand the applicable law and whether it appropriately fits your needs.
Florida’s new Limited Liability Company (“LLC”) Act went into effect January 1, 2014. The statute – which is entitled “Florida Revised Limited Liability Company Act” and is codified in Chapter 605 of the Florida Statutes – was enacted for the purpose of ensuring Florida remains a competitive and desirable location for business owners and start-ups to organize and perfect their trade.
The new statute incorporates a number of considerable and notable changes in order to carry out its purpose. These changes include the following: (1) modernizing Florida’s LLC laws in order to better keep pace with the ever-changing developments in the commercial use of LLC’s; (2) serving as an improved and flexible statutory model for courts, attorneys, and business owners to more easily follow and interpret by correcting significant anomalies carried by the language of the old statute; and (3) including provisions from the ABA Revised Prototype LLC Act, Florida’s Revised Model Business Corporation Act, Florida’s Revised Uniform Limited Partnership Act, and the LLC acts utilized in Delaware and other top, influential commercial states. Specifically, some of the highlights of the Florida Revised Limited Liability Act include:
- Expanding the list of non-waivable provisions that can be contained in a LLC’s operating agreement;
- Stating that operating agreements may no longer provide an indemnification clause for certain kinds of impermissible conduct and other certain circumstances;
- Allowing members of the LLC to file a statement of authority or a statement of denial to better clarify who has the ability to bind the LLC to contractual agreements;
- Eliminating the term “managing member,” resulting in LLCs being either “member-managed” or “manager-managed” from this point forward;
- Modifying default voting and management rules for both members and managers of the LLC;
- Clarifying the grounds for judicial dissolution and the appointment of receivers and custodians while also adding provisions regarding the winding up of the LLC’s affairs; and
- Modifying the appraisal rights of LLCs by adding additional events that may serve as triggering appraisal rights.
As of now, Florida’s new LLC Act applies only to LLCs formed on or after January 1, 2014 and to LLCs organized prior to the effective date who have decided to submit to the governance of the new law. Beginning January 1, 2015, all LLCs organized in Florida, including those formed prior to January 1, 2014, will come under the guidance of the statute. By that point, the thought is that all Florida LLCs would have had the requisite amount of time to make sure they are in compliance before becoming subject to the new Act. For those interested in reading further on how the new Florida LLC Act fully modifies and expands the prior version, be sure to review the White Paper prepared by the Executive Committee of the Florida Bar Revised LLC Act Drafting Committee.