Learn what limited liability companies need to look out for now.
If you have an existing Florida limited liability company (LLC) you should consider meeting with a business law attorney to amend your articles or operating agreement to comply with the new LLC law enacted in June of 2013. The new law will become effective on January 1, 2014 for all new businesses wishing to operate as an LLC. LLCs established prior to this date may continue to conduct business under the previous law, but only until January 1, 2015. This means that existing Florida LLCs will have one additional year to comply with the revised act.
Some of the more important changes to the law include a member’s ability of dissociation by express will. Simply put, at any time a member may notify the company of his/her intention to withdraw, whether or not it is wrongful, but is not entitled to payment for his/her ownership interest.
It is likely that many members of LLCs will misinterpret the law for their own personal financial benefit and may withdraw. But if it is done wrongfully, another provision within the law may hold that member liable for misconduct, debt, obligation or other liability to the LLC or its other members.
Remember that as of January 2014 these laws are in effect and you need to be aware of changes that affect the members and consider amendments to your articles or operating agreement. Other examples of changes to the law include:
•Under the existing law, only those LLC members that signed the LLC’s operating agreement were bound by its terms. Under the new law, all members are bound, even if they do not sign the agreement.
•If the operating agreement requires members to make contributions of capital to the LLC and a member fails to do so, a creditor that loaned money to the LLC relying on this obligation can force that member to contribute.
•Without an agreement for compensation of members, they are not entitled to compensation for services, except for services related to the winding up of an LLC.
•Under the new law, unless the articles of organization or operating agreement state that the LLC is manager-managed, all Florida LLCs are considered to be member-managed, and all members have authority as agents of the LLC to bind the company. Managers of manager-managed LLCs will be subject to a non-competition covenant unless waived in the operating agreement.
These are but a few of the many changes to the new laws governing Florida LLCs. Any new LLC must be formed in compliance with the Florida Revised LLC Act. In addition, members of existing LLCs should, without delay, consult with experienced legal counsel in order to evaluate whether existing operating agreements should be revised in order to address the changes in the Florida Revised LLC Act.