Limited Liability Companies
Limited Liability Companies (LLC) have been the fastest growing business entities because of the enormous flexibility they provide for defining the economic rights, management roles and duties of the members; as well as providing for matching tax benefits and burdens in tandem with the members’ economic rights. Perhaps the most significant appeal of LLC’s are the statutory and contractual protections afforded its’ members and assets (when planned properly) from many types of potential, future creditors.
LLCs can only be organized by filing Articles of Organization with the state in which it is organized, but most often those Articles include only the minimum required information—name, address, registered agent, etc. The details of the deal among the members must be set forth in an operating agreement; otherwise, the members will be bound by default rules provided by the state LLC statute. A written operating agreement is essential to ensure the members understand their respective rights and obligations, and have the ability to enforce them.
The members’ adoption of a written operating agreement is not the end of the process. The operating agreement needs to be kept current to reflect developments in the ownership and operation of the LLC and, even more importantly at this time, to reflect the adoption and effectiveness of Florida’s Revised Limited Liability Company Act (the Revised LLC Act). The Revised LLC Act is a complete restatement of Florida’s law governing LLCs, which became effective for all Florida LLCs as of January 1, 2015. The Members of CSB&B were deeply involved in the drafting of the Revised LLC Act through their work as members of the Tax Section of the Florida Bar, and so are uniquely qualified to assist clients in making the many choices that confront parties to an operating agreement. This is especially true with respect to the most recent amendments to the Revised LLC Act, which became effective July, 1 2015. The most significant of these amendments will impose an increased burden of fiduciary responsibility on the members and managers who manage LLCs. The Revised Act had limited that fiduciary responsibility; but the 2015 amendments have now re-imposed much greater duties that can only be limited by an express, written provision in the LLC’s operating agreement.
At CSB&B, we can provide guidance and insight into the complexities of balancing the rights and duties, as well as the tax consequences of forming, owning and operating LLCs.