Florida business owners have a choice regarding how they want to organize their entity. One option is for the business to incorporate. Incorporating can be beneficial. However, owners must understand all the requirements associated with the corporate structure. There are also alternative business formations that offer similar protections. If you are considering incorporating, you will need to know: Does my Florida corporation require an operating agreement?
Corporations and Limited Liability Companies
A corporation is a legal entity that exists independently from its managers and owners. The corporation is separate and distinct; therefore, it does not end when its owners die or sell their interests. Corporations can pay taxes, enter into contracts, and conduct business. The corporate structure provides owners with limited liability. However, corporations have certain formalities, such as holding regular stockholder meetings.
A limited liability company (LLC) is different. Although the LLC is in many ways like a corporation, there are some important distinctions. LLC owners are usually referred to as members, while corporate owners are shareholders. Like a corporation, an LLC formation offers owners limited liability for the debts and acts of the LLC. Corporate entities have numerous requirements, such as preparing and filing articles of incorporation, bylaws, and other governing documents. By contrast, LLCs don’t have to comply with the same formalities as corporations. However, operating agreements are associated with LLCs.
What is an Operating Agreement?
An operating agreement is a contract between LLC members that governs several matters such as member contributions, how profits will be distributed, how decisions will be made within the entity and other important tasks the entity must perform. In addition, the operating agreement identifies the details and obligations of those managing, owning, and operating the LLC. Operating agreements also usually provide information about how members can be withdrawn, accounting methods, and other important matters pertaining to entity operations.
Does my Florida LLC have to Have an Operating Agreement?
Florida law does not require an LLC to have an operating agreement. However, it’s generally recommended that one be developed and put in place. The law recognizes these agreements and provides support for their operation and enforcement. If your LLC does not have an operating agreement, it will be subject to the more general Florida LLC Rules. These rules don’t typically account for a business’s unique functions and needs. Therefore, it is generally better for the LLC and its members to have an operating agreement that is structured according to the entity’s needs.
An LLC’s operating agreement can be crucial to helping members avoid disputes and facilitating operations. The agreement can also clarify expectations for members and help ensure that they are accountable to the entity.
Your LLC’s operating agreement should be prepared by an experienced Florida business attorney. Your business lawyer will be familiar with the applicable business law and can help you create an agreement that protects your interests and supports the LLC. If you need help with your LLC’s operating agreement, you should contact an experienced Florida business attorney to discuss your entity’s needs as soon as possible.
Contact an Experienced Florida Business Lawyer
Attorney Richard Sierra at the Florida Small Business Center assists clients like you with commercial leasing, business, and litigation matters. As always, Our Goal Is to Help You Succeed™. For an appointment, you may call us at 1-866-842-5202 or use the contact form on our website. We represent clients throughout the State of Florida, including Coral Springs, Coconut Creek, Boca Raton, Delray Beach, Pompano Beach, Sunrise, Fort Lauderdale, Miami, West Palm Beach, Jupiter, Deerfield Beach, Stuart, Port St. Lucie, Orlando, Naples, Fort Myers, Sarasota, Tampa, and surrounding communities.