On January 1, 2015, Florida’s Revised Limited Liability Company Act will apply to ALL LLCs incorporated in and doing business in Florida and it will be the new rule. The changes from the old LLC Act are dramatic and substantial. Is your LLC ready?
The old LLC Act was missing a lot of default provisions that previously had to be addressed by operating agreements, if the business had one. The new Act fills in those gaps and, taken together, operate as a fallback operating agreement for businesses that don’t have one. But, do you even know what those new provisions are and really want what the Legislature has chosen for your business?
If your company has no operating agreement, the new Act provides that it is deemed member-managed from January 1, 2015. That may not be the way your company is set up, but it will be on January 1 unless you make a new operating agreement. Also, members will have certain rights that they previously did not and that you might not want to give them, such as appraisal rights. Most notably, the new Act sets the value of membership interest as “fair value”, which is a somewhat nebulous concept and requires expensive expert evaluation and testimony to establish. Maybe your business is better served by a set amount or a formula such as three times EBITA. Without an operating agreement, you will be stuck with fair value from January 1, 2015.
Your updated or new operating agreement can depart from these new statutory defaults and apply a different set of rules and standards that serve the unique needs of your business. The cost? Far less to make an operating agreement before January 1, 2015, than to litigate these issues later. Of course, you can also wait until after January 1, 2015, and hope for the best if you are the gambling type and like to take risks with the business that you built.
The prudent and proper way to approach this situation is to sit down with a qualified expert in business litigation who understands how these issues are litigated and how to structure them to avoid litigation or at least maximize the opportunities for success in future disputes. Your business is one of the most important elements of your life and livelihood. If you had a water leak in your house or a problem with your car’s engine, would you just leave it and hope for the best? Of course not. So, the optimum time to “repair” your LLC is before the changeover on January 1, 2015.
To schedule an evaluation of your LLC and the preparation of a new operating agreement or other important documents, such as contracts, liability waivers, non-competes, and non-disclosures, to name a few, contact the Law Office of David Steinfeld at (561) 316-7905 or through http://www.thepalmbeachbusinesslawyer.com or http://davidsteinfeld.com