Come January 1, 2013, the Florida Revised LLC Act will become law. Most of the statutory provisions may be overridden by provisions in the LLC’s Operating Agreement. However, there are some provisions, based on Florida Statutes Section 605.0105 that may not be waived.
If a management provision is not specified, then the default will be a member-managed LLC. A member managed LLC allows all members to have management authority unless the Operating Agreement specifies otherwise. A member may not be compensated for managing the LLC unless those services were rendered in the winding up of the company. With a manager managed LLC, the managers are chosen by the consent of that member or members who have a fifty percent interest in the LLC. Managers may be removed without cause at any time by consent of that member or members who have a fifty percent interest in the LLC. Voting Rights: Voting rights are directly related to the percentage of interest in the profits of the LLC. If a member holds a 25% interest in the profits, that member has a 25% weight of the total vote on matters. A majority vote is sufficient for approving a matter if a meeting is held. However, if a meeting is not held, then unanimous consent is required.
In a member-managed LLC, each member of the LLC is an agent. Therefore, each member can bind the company in matters pertaining to the ordinary course of the LLC’s activities unless the member does not have authority and the person dealing with the member knows that member does not have authority. Similarly, in a manager managed LLC, the manager is an agent and can bind the company in matters pertaining to the ordinary course of the LLC’s activities unless the manager does not have authority and the person dealing with the manager knows that manager does not have authority. The LLC may file a certified statement of authority limiting the manager’s ability to sign and deliver deeds or other instruments.
Standards of Conduct:
Both managers and member of an LLC owe fiduciary duties of loyalty and care to the LLC.
The duty of loyalty is defined as follows:
1. Accounting to the LLC and acting as trustee
2. Not dealing with a person or entity that has an adverse interest to the LLC
3. Not competing with the LLC
The duty of care is defined as refraining from engaging in the following conduct either in the regular activities or winding up of the LLC:
1. Grossly negligent or reckless conduct
2. Willful or intention conduct misconduct
3. Knowing violation of law
Limitation of Liability of Managers and Members:
A manager or member is not liable for monetary damages to the LLC, its members or any other person for activities conducted in the normal course of business unless the manager or member engaged in any acts listed in Section 605.04093 Florida Statutes.
If a member of a LLC has a judgment creditor, that judgment creditor may obtain a charging order from the court that allows the judgment creditor to receive the debtor’s distributions from the LLC. However, if the LLC is a sole member LLC, and the judgment creditor may not be able to have the judgment satisfied in a reasonable amount of time, the judgment creditor may be granted the member’s interest in the LLC. From there, the judgment creditor may sell the entire interest of the LLC in a foreclosure sale.
This blog is based on an article in the Florida Bar Journal. To read more, visit:http://www.floridabar.org/DIVCOM/JN/JNJournal01.nsf/8c9f13012b96736985256aa900624829/fdb60ef10a411e6285257c12004a1e5e!OpenDocument
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