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Llc Operating Agreement LLCs

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									LLCs in Florida (Updated Fall

Professor Marilyn Cane

NSU Law 2008
LLCs Chapter 608 Florida Stats

   State Charter

   Structural Flexibility

   Limited Liability
Florida LLCs Taxation

    No Corporate Income Tax at
    State Level

 Federal  Partnership Taxation or
    Corporate Taxation choice
    under “Check the Box”
Florida LLCs Fiduciary Duties
   The managers and managing members of
    an LLC owe the fiduciary duties of loyalty
    and care to the LLC and all of its

   The LLC operating agreement may not
    eliminate the duty of loyalty completely
    and may not unreasonably reduce the
    duty of care
Florida LLCs Distributions
    The earnings of an LLC may be
    distributed among the members in any
    way that the members agree, as set forth
    in the LLC operating agreement

   If there is no provision in the operating
    agreement, profits and losses must be
    allocated on the basis of the agreed value
    of the capital contributions made to the
    LLC by each member, to the extent
    received by the LLC and not returned to
    the member.
Florida LLCs

   May have single member LLC, like a
    sole proprietorship but with limited
   Filing of Articles of Organization
    with Secretary of State in
   Operating Agreement is not filed. It
    is like an owners agreement and
    by-laws combined
Florida LLC vs. S Corp

   S Corp- not more than 100
    shareholders, no more than one
    class of stock (except voting), no
    non-resident aliens

   No such limits on LLC
Florida LLCs Deduction of Losses
   S Corp- Losses deducted only up to
    amount of shareholders basis in
    stock plus personal loans

   LLC owner’s basis includes the
    member’s proportionate share of
    LLC liabilities, thus LLC member
    may be able to deduct higher
    amount of loss
Florida LLCs- Management
   Member-Managed LLC default rule
    is management vested in members
    in proportion to the then current
    percentage in profits

   Manager-Managed LLC default rule
    is that any matter may be decided
    by manager or a majority of
Florida LLCs Liability of Members
   FL ST § 608.701 provides :
   In any case in which a party seeks to hold the
    members of a limited liability company personally
    responsible for the liabilities or alleged improper
    actions of the limited liability company, the court shall
    apply the case law which interprets the
    conditions and circumstances under which the
    corporate veil of a corporation may be pierced
    under the law of this state.

   See Dania Jai-Alai Palace, Inc. v. Sykes, 450
    So.2d 1114 (Fla. 1984)

   NOTE: Only LLCs ( not LPs or LLPs or LLLPs) have
    this protection directing the courts to corporate
    case law
Florida LLCs - Transferability

   Whereas stock in a corporation is
    freely transferable, full membership
    interest (including management and
    voting rights ) in LLC is NOT
    transferable unless all members
    agree ( like General Partnership)
    UNLESS otherwise agreed in either
    the articles of organization or the
    operating agreement.
Address Transferability in Operating

   As a threshold issue, the members should
    determine whether voluntary transfer of
    membership interests will be permitted
    and, if so, whether a transferee of a
    membership interest will have the right to
    become a member of the LLC or receive
    only the economic rights of a member,
    such as the right to receive distributions
    and allocations of profits and losses.
Florida LLCs-Continuity of Life
   Corporations deemed perpetual
   Partnerships may be dissolved
    easily (N.B. RUPA dissociation)
   LLCs continue unless they expire
    1)in period of time or event
    specified in agreement 2)upon
    unanimous agreement 3) death or
    membership termination of last
    member or 4) court order
Florida LLCs-Dissociation
   Partner in partnership may
    dissociate at any time for any
    reason (may be liable for damages
    for breach of contract, however)

   Member of LLC may NOT dissociate
    unless that right is expressly
    granted by the articles or in the
    operating agreement
Withdrawal of Member
   A member may withdraw from a limited liability
    company only at the time or upon the occurrence
    of an event specified in the articles of
    organization or operating agreement and in
    accordance with the articles of organization or
    operating agreement.
   Notwithstanding anything to the contrary under
    applicable law, unless the articles of organization
    or operating agreement provides otherwise, a
    member may not resign from a limited liability
    company prior to the dissolution and winding up
    of the limited liability company.
   The articles of organization or operating agreement
    may provide that a limited liability company interest
    may not be assigned prior to the dissolution and
    winding up of the limited liability company
Payment Upon Withdrawal of
   Upon withdrawal, a withdrawing member is
    entitled to receive any distribution to which the
    withdrawing member is entitled under the articles
    of organization or operating agreement.

   If not otherwise provided in the articles of
    organization and operating agreement, the
    withdrawing member is entitled to receive,
    within a reasonable time after withdrawal,
    the fair value of the withdrawing member's
    interest in the limited liability company as of the
    date of resignation based upon the withdrawing
    member's right to share in distributions from the
    limited liability company.

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