Estate and Succession Planning
Dean Mead’s Estate and Succession Planning Department is one of the largest and most respected groups of estate planning attorneys in Florida. We are frequently…
Florida Revised Limited Liability Company Act
The Florida legislature, in the 2013 session, passed Senate Bill 1300, which creates a Revised Limited Liability Company Act in Florida as a new Chapter 605 of the Florida Statutes (the current LLC Act is in Chapter 608). It is largely based on the Revised Uniform Liability Company Act which was approved in 2006 by the National Conference of Commissioners on Uniform State Laws. Although, as of the publishing of this post, the bill has not been signed by Governor Scott, we anticipate that it will be signed.
Effective Date: Effective January 1, 2014. Until January 1, 2015, LLCs in existence before January 1, 2014 may continue to operate under Chapter 608. As of January 1, 2015, all LLCs are subject to Chapter 605, and Chapter 608 is repealed.
Bottom Line: If you have an LLC, you need to have legal counsel review your documents to ensure that all of the provisions allowed/required by the new act are addressed. If you do not have an operating agreement, our firm strongly recommends that you get one – the default provisions could be onerous.
Notable Provisions
1. Makes it clear that electronic signatures are accepted (previously this was not clear). § 605.0102(62).
2. Expands the list of provisions which cannot be waived or altered in the operating agreement. § 605.0105(3). Some notable additions to the list of what an operating agreement cannot do: vary the power of a member to dissociate, vary the right of a member to approve a merger, interest exchange, or conversion, restrict the rights of a person other than a member or manager.
3. Regardless of whether the LLC is itself a signatory to the operating agreement, it is bound by and may enforce any provisions thereof. § 605.0106(1). Because this was unclear, previously we had frequently drafted operating agreements to be signed by the Company.
4. A person who becomes a member of an LLC is bound by and subject to the operating agreement even if they don’t sign it. § 605.0106(2). This is especially notable if you consider that an operating agreement is not subject to the statute of frauds (§ 605.0106(6)), and by definition an operating agreement may be oral (§ 605.0102(45)). So when becoming a member of a new company under the new act, it is important that the new member review the operating agreement and get signed statements regarding any oral agreements in place. This could be a trap for the unwary.
5. An LLC has to have at least one member at the time of its effective date. § 605.0201(4). To the extent people were forming LLCs to save names or as shelf entities for some purpose, this provision would prevent such activities.
6. A member can dissociate. § 605.0216. However, this does not trigger a buy-out right. The member would have only the rights of a unadmitted transferee with respect to the company, with some limited exceptions.
7. Statements of authority can be filed with the state setting forth what authority that individual has with respect to the LLC – such as officers, managers, etc. § 605.0302. The statement is good for five years unless revoked earlier – so, if an officer is removed, make sure their certificate of authority is revoked, or alternatively if five years passes, make sure a new certificate is filed.
8. A creditor can enforce a capital contribution. § 605.0403(4). This does not appear to be waivable.
9. No longer an option to have a managing-member. Now, all LLCs are either manager managed or member managed. § 605.0407.
10. There is a non-compete for managers of a manager-managed company or members of a member-managed company. § 605.04091(2)(c). This could be a real problem if not waived.
11. Charging orders – the Olmstead fix is retained. § 605.0502. A charging order is the sole remedy for a multi-member LLC, and with a single member LLC, the creditor must establish that a charging order is not sufficient in order to be able to foreclose on the interest.
12. Owning income-producing real property constitutes transacting business in Florida (necessitating qualification in Florida). § 605.0905(3).
13. Appraisal rights are expanded in scope, but can be waived. § 605.1006.
14. The new act allows interest exchanges (§ 605.1031) and domestication of foreign (non-US) entities (§ 605.1051).
