Explaining the New LLC Rules in Florida
On June 14, 2013, Governor Rick Scott signed into law a new set of rules on the formation of Limited Liability Companies, or LLCs, in Florida. For new and existing LLCs in the state, it may be necessary to consult a business attorney to provide guidance on this new law to get a better understanding of what will change when the law goes into effect on January 1, 2014. LLCs in existence before January 1, 2014 can follow the old rules until January 1, 2015, when all LLCs will have to follow the new rules.
What Changed Under the New Rules?
There are sixty-nine new definitions in the revised law. Many of the new definitions are designed to clear confusion from the prior law. One issue that was addressed was the definition of “managing member” from the prior law. In the new law, that definition is actually removed since it led to considerable confusion for businesses. Instead, the new law creates a new default rule making LLCs member-managed unless explicitly stated in the organizational documents of the company. Previously, it was possible to create confusion over whether there was just a “managing member” of a member-managed LLC or if the “managing member” actually indirectly created a manager-managed LLC.
The rules also wisely redefine terms such as “sign” and “writing” to conform to the modern workplace. Previously, it was unclear if copies, emails, and electronic signatures were legally enforceable under state law. Under the new rules, electronically-based documents, such as emails and documents with electronic signatures are explicitly included as acceptable.
Changes to the Operating Agreement of a Florida LLC
A Limited Liability Company is based on contracts. While contracts between the LLC and its customers are very important, the key contract is the operating agreement. The operating agreement is the contract that establishes the LLC itself. The reason why an operating agreement is so important in an LLC is that it defines what the purpose of the company actually is, the relationship between the members of the LLC, and what the duties of any LLC manager might be.
The new Florida rules expand the definition of an operating agreement. Previously, an operating agreement could be either written or oral. Under the new rules, an operating agreement can be created among members through a “record.” A record can be any piece of information that would lead a reasonable person to believe that an agreement to create a LLC was formed. Also, the new rules provide default guidance when the operating agreement is silent. That means that if the agreement does not state rights and duties of members, managers, or the company itself, then the state imposes default minimum rules.
The new rules also add 11 more non-waivable provisions. A key provision is that an operating agreement cannot generally eliminate the duties of loyalty and care to the company that each member and manager has to the company. The new law does not permit an LLC to release a member from liability for engaging in bad faith, willful, or intentional misconduct, or a knowing violation of the law.
For More Information On Recent Business Law Changes
For more information and guidance on these changes and how they could affect your business, contact a knowledgeable Miami Business Attorney.