Florida LLC
Operating Agreement

Why should a Florida LLC have an operating agreement?

A Florida LLC should have an operating agreement because a company cannot act for itself. In order to operate, LLCs require real humans (and other entities) to carry out company operations.

According to FL Stat § 605.0102, LLCs are not required to have a written operating agreement. However, an operating agreement is legally binding, which makes it one of your most important internal documents. Here’s why:

1. Your operating agreement proves you own your LLC.

In Florida, businesses can opt not to include the names of any members or managers in their articles (although this information will be required later on in the annual report). The minimal information required in the articles helps businesses maintain privacy initially—but doesn’t help members show proof of ownership. You’ll need proof of ownership to complete important steps for your LLC, like opening a bank account.

Because an operating agreement lists the names of all members and managers, it can be used to show that you own your business.

2. An operating agreement can help reinforce your limited liability status.

In order to maintain limited liability status, all LLCs must consistently demonstrate that the company is a separate legal entity from its members. In addition to setting up a bank account for your LLC, having an operating agreement helps show this separation by creating policies and procedures for the business.

3. An operating agreement can help head off misunderstandings.

Hey, it happens. People fight, and sometimes they aren’t on the same page, which can make it difficult to move forward with your business. By having an operating agreement, you establish an agreed-upon set of rules for your company early on, which can help mitigate any misunderstandings later on.

4. An operating agreement can override Florida’s default laws.

If you don’t have an operating agreement, your business will be governed by Florida’s default laws. The problem is, Florida’s LLC statutes might not be right for your business. Creating an operating agreement for your Florida LLC means that you can create an organizational structure (within the bounds of the law) to suit the needs of your particular business.

Florida Case Law

We asked our lawyers for an example of how an operating agreement can make or break your LLC. Here’s what they said.*

“Consider the case of Froonjian v Ultimate Combatant, LLC, where the failure to actually adopt and maintain an operating agreement led to disputes among the members, resulting in extensive and expensive litigation. An individual was added as a member of the LLC, then was promptly expelled. The courts, noting the absence of the operating agreement, applied the default statutory rules. As a result, the courts determined that the two members, constituting a majority interest of the LLC, could expel the other member. However, the court determined that the membership interest of the member could not be redistributed without violating the statutory rules. As a consequence, the expelled individual was permitted to restate their case back at the trial level, prolonging resolution to the matter.

“Such valuable resources could have been preserved for more fulfilling commercial purposes had the members of the LLC taken the time to memorialize and distill their understanding into an operating agreement.”

What is included in a Florida operating agreement?

Your operating agreement lays out the internal structure of your LLC. While you may include anything not already covered by Florida state statutes, a strong operating agreement will include:

• Company formation / dissolution
• Initial contributions
• Profits, losses, and distributions
• Management
• Compensation
• Bookkeeping procedures
• Transfer of membership interest
• Voting rights and decision-making powers