Why You Need an Operating Agreement for Your Florida LLC

Like most states, Florida has a default provision that — in the absence of an operating agreement created by a limited liability company (LLC) — will dictate how that LLC will be managed. LLC owners who are unaware of Florida’s default provision — or choose to ignore it — could be making a big mistake since the state’s default provision may not be the right fit for your company.

For example, many states provide that the voting power of each member should be in proportion to their investment in the company. This may not necessarily work for you, especially if you want to recognize the “sweat equity” contribution of a member as equal to another member’s financial contribution.

Under most states’ LLC default provisions, the ability for members to transfer their interest in the LLC is unrestricted. But you may not want to potentially be in business with a partner you don’t know or don’t care to deal with as a member of your LLC.

An operating agreement can also help members avoid costly and stressful events, including:

Disputes among members regarding the rights and responsibilities of each owner. An operating agreement will detail the specific rights and responsibilities of each LLC owner so there is no confusion.

Harm that could arise from state default laws. State default laws are one-size-fits-all, which may not be a good fit for your company. If your state laws dictate that corporate actions are subject to a unanimous vote by members, and you have problems getting everyone to agree, this could hamper the growth of your company. An operating agreement allows you to create custom rules for the operation of your LLC.

Disputes that arise due to lack of clarity. Many state default laws do not adequately address disputes. By preemptively planning for potential scenarios that could arise, such as the need for capital and the responsibilities of each member to provide it, you can address these in advance so each member knows what to expect, thus avoiding potential disputes in the future.