Robert M. Kritzman and Alyssa Razook Wan
The Florida Legislature has adopted the Florida Revised Limited Liability Company Act (“New LLC Act”) which substantially revises Florida’s prior LLC Act. These revisions to the law have a broad impact on Limited Liability Companies (“LLCs”) in Florida, include changes that could affect members’ and/or managers’ liability, and may impact which individuals or positions within an LLC have apparent authority to legally bind the entity. The New LLC Act also affects how an LLC’s operating agreement may be enforced or interpreted. We recommend you consult with your legal advisors to determine how the New LLC Act may affect your LLC and its operating agreement.
The New LLC Act is currently effective for all LLCs formed or registered to do business in Florida on or after January 1st, 2014 and for all records filed with the Florida Division of Corporations regardless of when an LLC was formed or registered to do business in Florida. Florida LLCs in existence or registered to do business in Florida before January 1st, 2014 are governed by the prior statute for the remainder of 2014 and will be governed by the New LLC Act effective January 1st, 2015. Therefore, both newly established and existing LLCs are affected by the legislation.
Like the prior LLC Act, the New LLC Act is a default statue and many new default provisions relating to matters which are not addressed in an LLC’s operating agreement have been added to the New LLC Act. Some of the more significant changes in LLC law created by the New LLC Act include:
- Eliminating the concept in Florida’s prior LLC law whereby an LLC could be managed by one or more “managing members.” The other two (2) management structures under the prior LLC law which allow for the LLC to be managed by its members or managed by its managers remain in the New LLC Act. Under the New LLC Act, an LLC that is managed by a “managing member” will be deemed a member-managed LLC effective January 1st, 2015, subjecting management decisions to a vote of all members and potentially creating apparent authority to legally bind the LLC in all its members. If this result due to the change in the law is not intended by an existing LLC with a “managing member” structure, the LLC should be converted under the New LLC Act to a manager-managed LLC.
- Revising the default or implied rules for apportioning distributions, profits and/or losses and member voting rights.
- Permitting non-economic members (members with no economic interests in the LLC).
- Enumerating statutory provisions which cannot be waived in the LLC’s operating agreement and permitting some common operating agreement provisions only if the provisions “are not manifestly unreasonable” under the law.
- Creating the ability to provide constructive notice to third parties regarding the authority, or limitation of authority, of a position in the LLC or of one or more individuals to legally bind the LLC by filing a Statement of Authority (“SOA”) with the Division of Corporations. A person granted authority in an SOA may subsequently deny that authority by filing a statement of denial with the Florida Department of State.
- Imposing obligations on members of a member-managed LLC and managers of a manager-managed LLC to maintain the accuracy of information filed with the Division of Corporations.
We have only listed in brief summary fashion some of the significant changes to prior law created by the New LLC Act. The New LLC Act contains forty-two (42) new definitions not in the previous LLC Act and amends numerous existing definitions. Because the New LLC Act affects all LLCs doing business in Florida, readers should consult their legal advisors to understand the impact of this legislation on themselves and their businesses and to determine whether amendments to their operating agreement or articles of organization are necessary to avoid unintended consequences.
Further, third parties doing business with LLCs in Florida (including lenders) should consider any changes that may occur with respect to their contractual or business arrangements with LLCs.
This article is intended to inform clients and friends of Fowler White Burnett about legal developments affecting LLCs. Nothing in this article should be construed as legal advice and should not be relied on by any reader as legal advice or the basis of any action.