What Is a Florida LLC Operating Agreement?
All entities have rules by which they abide. These are the guidelines that dictate how members will carry out their duties and responsibilities. The beauty of these laws is that people know what is expected of them and this reduces the occurrence of disputes in the future. People are held accountable for their actions and this clear structure makes it easier to attract investors and uphold your professional status.
A Florida limited liability company operating agreement is a document used by LLCs to stipulate how members will behave. It shows who owns the business, what responsibilities each person has, the operations of the structure, and other pertinent details. While you might not need to have one, it’s always a good idea to cover your bases by having one in place because you never know what will happen in the future. You might not be planning on disagreeing with your members but you have no control over this. In the event that it happens, you will be glad that you sat down and created an operating agreement Florida to cater to the problem that you will be facing at that time.
Do I Need an Operating Agreement for an LLC in Florida?
You do not explicitly need an operating agreement Florida LLC as per the law. In fact, if the authorities have anything to do with it, you can very well start your operations without drafting an agreement. However, doing so would be risky because you would not have a contingency in place if something goes wrong. You are better off coming up with some basics or even covering your bases as a whole to:
- Reinforce your limited liability. If your organization has multiple members, this should not be an issue as your structure would be easy to define. But for people running LLCs on their own, it’s very easy for them to be regarded as sole proprietorships which can endanger their limited liability status. If you fall under the latter category, this document will be like an insurance policy.
- Define the structure of the organization. New ventures are easy to handle. There’s very little going on at the onset and it’s easy to share roles and responsibilities and lines tend to be blurred at this point. As time goes on, the responsibilities increase, and people start focusing on specific tasks. There are likely to be disagreements about who should do what especially when the workload is heavy. To prevent a situation where people spend time wrangling with each other, it’s better to be clear about these responsibilities from the start. X will do ABC, Y is responsible for DEF, and the list goes on. If you want peace and stability, an agreement will be an integral part of your organization.
- Show how much people own. In most cases, people bringing different amounts of capital. One person may bring in 10000 dollars and another may bring in 20000 dollars. These individuals will probably take home very different amounts from the profits accrued. If they work with the standard profit and sharing patterns, the one with 20000 dollars will be taking home twice as much as the other person. It’s not always the case, because people share these finances differently based on what they agree upon from the beginning. In the event that there is no clear pattern on who gets what and why it’s very likely that members will disagree, which can hamper the growth of the business and can even lead to premature dissolution.
- Cater to voting procedures. Organizations handle voting quite differently. In some, all members have an equal vote, which creates some form of equality among members. In other organizations, people vote based on what they have contributed to the business. In our earlier example, this will remain that the person with 20000 dollars will have two votes. If every 1000 dollars equates to 1 vote, the one with 20000 dollars will have 20 votes, which is twice as much as what the one with 10000 dollars will get. Not agreeing on such matters can be a source of contention in the future.
- Decide on ownership. When you invest in the business, you will get a given share of it. At some point, you or any other member may want to transfer your rights to another person, by inheritance or by sale, or any other means. You must agree on how this will take place. For example, in some organizations, the existing members have the first priority whenever there is a transfer. If they are not interested, the transferring member can now look outside the organization.
Most importantly, having some laid down rules enables you to benefit and protect you by avoiding default laws set by the state. Thus, if you want the final say when things go south, it’s time to consider drafting your own guidelines.
How can an operating agreement be drawn up?
Drafting a Florida operating agreement is quite a simple task. But when dealing with complex operations, it can prove to be challenging, more so if you have not had any experience in this regard. You can:
- Do it yourself by looking at what others have done and comparing this to your operations to find areas where you can tweak to match the best interests of your organization.
- Hire a lawyer, especially when dealing with intricate matters that require someone who has a great understanding of the law. This option is more costly but it comes with the benefit of being on the safe side if anything goes wrong and you need to use the operating agreement for LLC to battle it out in court.
- Hire a formation service to offer this document as part of the package. Depending on the company, you can either get a complete document or you can get a Florida LLC operating agreement template that you can fill as per the needs of your organization. If you get the service as part of your formation, it will be cheaper than engaging an attorney.
- Use an online agreement generator. There are tons of online templates which you can use to speak to the needs of your organization. They cater to both single-member and multi-member companies. The steps included are generally very simple and they allow you to enter details that pertain to your company at each stage. At the end of the process, you should have a document that you can use for official purposes. The generic nature of these templates might make them unsuitable for companies that handle highly complex operations.
What should be included in an operating agreement?
Your operating agreement of LLC should cover:
- How much interest members have.
- How much capital people have contributed, which can fall under money or sweat, or even both.
- How you will share profits and losses.
- Who will be in charge of running the operations?
- How you will vote on issues.
- How you will handle new members, transfer of rights, and the death of members.
- What you will do when members decide to dissolve the business.
You are free to include anything else in the operating agreement LLC Florida you feel is important if you feel that these sections are not adequate to cover what you do. The goal is to be as clear as you can to reduce ambiguity when solving any arising issues.
Where is an operating agreement filed in Florida?
While it is an official document, you’re not expected to file the Florida LLC operating agreement with the state. Instead, you should have one copy with your company records, and every member of the organization should have one. You might also need to provide this document to your financial institution when opening an account. Other than that, you do not have to provide it to anyone, given that this is a confidential agreement between members and there’s no need for the public to have an inkling as to what is included.
How much does an operating agreement cost in Florida?
The cost will depend on who drafts the operating agreement for LLC in Florida for you. If you do it yourself, it will probably set you back nothing. With a lawyer, you can expect to spend maybe $100 or more. When using an online generation service, you can get it for free or offer to pay for the premium package which will cost you a few tens of dollars. You also have the option to work with an LLC formation service. This latter category will set you back about $40-$100. However, if you use the formation service, you can get an operating agreement for an LLC as a bonus.
What Rules apply to an LLC without an Operating Agreement?
If you find yourself in a situation where you are faced with legal hurdles and do not have an official LLC operating agreement Florida to help you work through this, the authorities will subject you to their generic laws. These are known as state default laws which apply to every LLC in the state. Given that they were drafted with the aim of applying to all such entities, they are very general and standard and will not address specific issues in your organization. Someone in your organization will end up being on the losing end because of this lack of specificity. You are better off coming up with how you want to deal with any arising issues before they even occur.