Impact of the Revised Florida LLC Company Act
Most recent studies show that entrepreneurs choose to form LLCs in Florida. Statistics revealed that 398,575 Domestic Limited Liability Companies and 11,752 Foreign Limited Liability Companies were formed in the state of Florida alone.
A limited liability company is abbreviated as LLC. It’s a business structure that allows a company to operate with limited liability (similar to a corporation), but it’s easier to set up and maintain. It also gives the company the same tax treatment as a sole proprietorship or a partnership in terms of income pass-through.
The term “limited liability” in LLCs stems from this: by restricting the owners’ personal liability, the LLC protects the LLC owners. In general, this means that business obligations owed by the company, as well as any claims against the company, such as liens and lawsuits, are restricted to the company’s assets. In most states and under most situations, those who have such liens against a business cannot pursue the personal assets of the business owner(s).
However, this protection does not apply to criminal conduct undertaken by the LLC’s owners, and it can also be lost in the event of specific cases of negligence on the part of the LLC’s owners.
An LLC, unlike a corporation, is not considered a separate entity for tax reasons. The LLC’s owner(s) disclose their operational results, including profit or loss, on their personal income tax returns, just like a sole proprietorship or partnership would. The LLC does not have its own tax return.
Forming an LLC
Florida LLC legislation states that the following information is required for the formation of a Florida limited liability company (LLC):
- The name of the company is LLC (Name must meet Florida LLC naming requirements)
- The street and mailing addresses for the LLC’s main office
- Name of the registered agent, Florida address, and acceptance signature
Optional Information for the Formation of a Florida LLC:
- As long as the provisions do not clash with the LLC statute, LLC organizers can add their own provisions.
- LLC organizers can, but are not required to, make statements about management structure. The state will assume that the business has at least one member if no statements about management structure are made.
The Changes to The Act
For those with entrepreneurial ideas who desire to form a business, limited liability corporations (LLCs) have been and continue to be an appealing option. The procedure of forming an LLC is less time and money consuming than that of forming a corporation, and it allows for pass-through taxation. The Florida Revised Limited Liability Company Act (FRLLCA) entered into force in 2014, and all LLCs in Florida were subject to its governance on January 1, 2015.
The statute, which is legally codified as Chapter 605 of the Florida Statutes & Constitution, was established to keep up with the modern commercial uses of limited liability companies (LLCs). Furthermore, it shares many parallels with the proposed Revised Uniform Limited Liability Company Act, which unifies the legislation with similar acts in other states. The FRLLCA is a default statute, which means it applies to LLCs unless the operating agreement says otherwise.
Furthermore, the law recognizes that an implicit LLC operating agreement, like written and spoken operating agreements, is legitimate. The act made it possible for a single member to make an operational agreement.
Below are A few notable provisions:
- The law prohibits any LLC from changing its ability to be sued in its own name (for particular acts of wrongful conduct)
- Members may have the authority to bind an LLC after filing a statement of authority with the state. This is in line with another non-binding rule that specifies that LLCs can be controlled by members or by managers.
- The responsibility of good faith and fair dealing, as well as the duty of loyalty and care, are not extinguished by the law.
- The law takes several broad steps to safeguard and enforce members’ rights.
The FRLLCA’s mission was to make Florida more attractive to LLCs. It’s up to you to decide whether it had the desired effect. Members of an LLC should be aware that the FRLLCA, rather than an operating agreement, governs all elements of the business.
For this (and many other reasons), it is critical to choose an experienced business law attorney who is only focused on your company’s success.