Operating Agreement Basics
A limited liability company (LLC) is an attractive option if you are looking to engage in a business structure that will allow its members (investors) increased personal protection and less formalities (as compared to a corporation). And although not required in Florida, the most important document used by an LLC – even where there is only one member, or where the entity is family-owned – is its operating agreement, which structures its financial and functional decisions.
An LLC’s operating agreement serves to govern its internal operations; it acts as an official contract to which its members must adhere. You should note that the operating agreement is drafted in addition to, and not as a replacement for, the LLC’s Articles of Organization, which must be filed with the FL dept. of state to establish the LLC. However, the operating agreement formalizes the entity status of the LLC, thus providing its members with increased protection from personal liability. Furthermore, the operating agreement clarifies and memorializes in writing whatever terms members may have agreed to orally. Without this formality, it is difficult to guard against misunderstandings/ conflicts, as the state will apply an impersonal set of default rules to resolve members’ differences in its absence. Also, the operating agreement, like the shareholders’ agreement in corporations and partnership agreements in limited and general partnerships, is an important planning tool in that it can restrict/ require transfers to third parties, and specify members’ rights, under circumstances of divorce, disability or death.
To ensure that your operating agreement addresses the problems likely to arise in your course of business, you should hire a licensed Florida Business attorney who is experienced in the practice of business law to draft it for you. Other provisions to consider for your operating agreement include the following:
Because the operating agreement is so vital to the day-to-day operation of a LLC, it should be prepared immediately after filing your LLC and it should be kept in a secure, yet easily accessible location, and referred to periodically. You need NOT file your operating agreement with the state of Florida.
Contact an Experienced Business Law Attorney
If you would like more information about this topic, contact Lawrence Tolchinsky to find out how he can help you. You can contact him by phone at 954-458-8655 or by e-mail through this web site to schedule an appointment and learn more about title insurance. He offers a free initial consultation.
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