Limited Liability Companies
Limited Liability Companies (LLCs) have become the fastest-growing type of business entity because of their enormous flexibility in defining the income tax structure, economic rights, management roles, and duties of the members.
A Palm Beach County business attorney can provide guidance and insight into how the LLC should be taxed for federal income tax purposes (for example, as a partnership, S Corporation, or a disregarded entity), the drafting of the LLC’s Operating Agreement, advising on business issues that arise during the operation of the LLC’s business, and negotiating business transactions on behalf of the LLC and its members, including asset and stock acquisitions, recapitalizations, reorganizations, and spinoffs.
When planned properly, the most significant appeal of an LLC is the statutory and contractual protections afforded to its members and assets from many types of potential, future creditors.
A Palm Beach County Business Attorney Explains the Importance of an Operating Agreement
An LLC is organized by filing Articles of Organization (or an equivalent document, such as a Certificate of Formation) with the state in which it is organized. The Articles of Organization typically contain only the minimum required information by law, such as the name of the entity, the principal business address, and registered agent in the state.
An Operating Agreement can be carefully tailored to cater to the most complex business structures. Our firm has substantial experience preparing Operating Agreements for LLCs engaged in the real estate, health care, and technology industries.
What is an Operating Agreement?
An Operating Agreement or LLC Agreement (Operating Agreement) should be entered into by the members to set forth more detailed terms and conditions governing the operation and management of the LLC.
For example, an Operating Agreement can address how the LLC will be managed (for example, by its members, a manager, or a board of managers), how profits and losses are to be allocated amongst the members, and how distributions will be made to the members. An Operating Agreement can resolve issues related to owner succession and include additional provisions that restrict the transfer of a membership interest to third parties.
Who Does an Operating Agreement Govern?
The Operating Agreement serves as the binding contract between the members of the LLC. A state’s LLC statutes contain the default rules that will govern the operation of the LLC in the absence of an Operating Agreement. A default rule under the state’s LLC statutes only applies to the Operating Agreement or the Articles of Organization if such a document fails to address the particular issue covered by the default rule.
A written Operating Agreement is essential to ensure the members understand their respective rights and obligations to each other and the LLC, as well as to allow a member to enforce such rights and obligations against the LLC and their fellow members.
Does an Operating Agreement Ever Need to be Updated?
An Operating Agreement should be updated to reflect changes in law, the ownership structure, and the operation of the LLC’s business. For example, Operating Agreements should be amended and/or restated to reflect any statutory revisions or amendments enacted by the Florida Legislature with respect to the Florida Revised Limited Liability Company Act (the “Revised LLC Act”).
The Revised LLC Act was a complete restatement of Florida’s law governing LLCs, which became effective for all Florida LLCs as of January 1, 2015. Our attorneys were deeply involved in the drafting of the Revised LLC Act through our work as members of the Tax Section of the Florida Bar. As such, our legal team is uniquely qualified to assist clients in making the many choices that confront members of an LLC.
Work with a Florida and Palm Beach County Business Attorney to Structure Your LLC
For more information on how to structure an LLC in Florida contact a Comiter, Singer, Baseman & Braun Palm Beach County business attorney online or by calling us at 561-626-2101 or toll-free at 800-226-1484. We work with clients throughout the state of Florida, including those in Palm Beach Gardens and Boca Raton.