The Florida Revised LLC Act (“FRLA”) became law on June 14th, and beginning January 1, 2015, all LLCs will be subject to the FRLA. This blog highlights some important provisions.
Managing member: The term “managing-member” is no longer in the definitions section of the FRLA. The term was taken out because many LLCs were using the term when in fact the LLC was managed by its members. With the FRLA, the general default rule is that a LLC is member managed unless there are other facts that show that the LLC is actually managed by managers instead of members of the LLC.
Operating Agreement: The FRLA lists six essential provisions regarding the Operating Agreement (“OA”).
1. The OA is the primary piece of evidence used to prove the relationship between the members of the company and the LLC, the rights and duties of the members, and activitie and affairs of the LLC.
2. The FRLA is the default rule, so if the OA is silent on a particular subject, the provisions of the FRLA rule.
3. The FRLA lists 17 statutory provisions that are not waivable in an OA.
4. The FRLA approves certain language that is often found in an OA without any restrictions and approves other language that is often found in an OA as long as the language is not “manifestly unreasonable.”
5. The FRLA then defines “manifestly unreasonable.”
6. The FRLA allows penalties when a member fails to comply with the terms of the OA.
Agency and Authority. Under the FRLA, LLCs may file “Statements of Authority” with the Florida Department of State wherein the LLC provides record notice to third parties of a person authorized by the LLC to bind the LLC or in the alternative to limit a person’s power.
Liability for Contributions. If a member fails to uphold its promise to contribute to an LLC, the FRLA provides consequences for that member. However, that promise must be in writing and signed. The member may be excused from its promise if all members consent.
Distributions. The FRLA only permits distributions to its members when the company is solvent. Therefore, if a company is unable to pay its monthly expenses, it may not make a distribution to its members. However, compensation for services (i.e. payroll) may be paid even if the company is not solvent.
For more information regarding LLCs and other business entities, please contact Mara & Mara, P.A. We provide business law representation in Deland, Palm Coast, Daytona Beach, and the surrounding areas.
Mara Law, P.A. is located in Ormond Beach, FL and serves clients in and around Bunnell, New Smyrna Beach, De Leon Springs, Palm Coast, Daytona Beach, Flagler Beach, Barberville, Pierson, Seville, Port Orange, Flagler County and Volusia County.
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