Why Your Florida LLC Needs an Operating Agreement
If you’ve chosen to start an LLC in Florida and completed your paperwork, you might be wondering what else you need to do. In order to reduce your risk of conflicts and other issues down the line, it’s important that you consider creating an Operating Agreement for your LLC.
What is an Operating Agreement?
While Florida isn’t one of the states that mandate that all LLCs need an Operating Agreement, that doesn’t mean you should skip creating one. The main purpose of this important document is to determine a structure for your business, establish the governing rules of your company, and offer additional protection for your limited liability status.
There is no formal structure required when creating an operating agreement, and the topics you can include are nearly endless. Typical subjects covered in many LLC Operating Agreements include:
- Who runs the LLC
- Is it member-managed or manager-managed
- How interests are transferred
- Voting percentages
Reasons why Operating Agreements are Important
There are many reasons why you should draft an Operating Agreement for your Florida LLC, but here are some of the most important ones.
- Your LLC is bound by Florida LLC laws without an Operating Agreement. Florida allows LLC default rules to be overwritten by the use of an Operating Agreement. Generic LLC laws are designed to fit a wide variety of scenarios, which means they are not optimal nor do they address the individual needs of a business. There are some provisions that cannot be waived, which is one of the reasons you should have a knowledgeable West Palm Beach business formation attorney help draft your agreement.
- An Operating Agreement can help prevent and resolve disputes. Your business is just starting out, so you may not have any disputes — yet. It’s nearly inevitable that at some point you will have a dispute. Operating Agreements can set forth procedures, which can reduce the risk of disputes. If one does arise, the agreement can set forth how a disagreement is to be resolved. This helps reduce animosity between involved parties.
- It can address what to do in the event of divorce or death of a member. You might be young, and the idea of dying is not something on your mind right now. However, what will happen to your business if a member does pass away? What if they get divorced? Will you allow the spouse to step in and suddenly become a voting member? What if he or she doesn’t want to be part of the business? What if you don’t have enough to buy them out? Your Operating Agreement can spell out what the procedures are before anything happens.
- The agreement can help with future growth. What business doesn’t want to grow and make more money? At some point you may want to add investors, but without any structure set forth, it could be difficult. Your Operating Agreement can include plans for future growth while providing flexibility for it to happen without the need to change the voting structure or management.
Retaining a Florida Business Formation Attorney
If you’re setting up an LLC in Florida, why not let an experienced business transactional attorney help you? At the Law Offices of Larry E. Bray, P.A., we have experience in setting up new businesses as well as litigating disputes between them. We know many of the issues that lead to litigation and we can help your LLC by setting up an Operating Agreement that reduces that risk and streamlines your day-to-day operations. Contact us today at 561-571-8970 to schedule a consultation.