Alert to Florida LLC Members and Managers
By: Morris Law Group - April 15, 2014
Effective January 1, 2014, the Florida New Uniform Limited Liability Company Act ("New Act") now contained in Chapter 605 of the Florida Statutes, becomes the new law of the land regulating doing business as an LLC in Florida. The New Act is effective for all Florida LLCs organized after that date. Additionally, for a period of one year, LLCs organized before January 1, 2014 may elect to be governed by the New Act rather than the former statute. However, as of January 15, 2015, all Florida LLCs will be governed by the New Act.
As such, it is important to understand the changes that will affect governance of all Florida LLCs in the coming year. It is important that if you are currently an owner/manager of a business operating as an LLC or a member of such, that you review your operating agreement and the new legislative changes in order to make sure you and your business are protected under current law.
The New Act, §605.0102, now includes 69 definitions (up from 26 in existing law), plus 10 additional definitions specific to appraisal rights, which are contained in §605.1061. Many of the new definitions pertain to the new uniform terminology for matters related to mergers, conversions, interest exchanges, and domestications.
The term, "managing member," was intentionally eliminated in the New act. For any LLCs in existence before January 1, 2014 which use the term "managing member", the New act states that the term does not, in and of itself, make the LLC manager-managed. Absent other evidence of intent to be manager-managed, the general default rule will apply which means the LLC is member-managed, and all members retain statutory apparent authority to bind the LLC, notwithstanding that some members may not be designated "managing members." For LLCs formed after the effective date, the term will not be used by the department in filings or annual reports.
The new act provides that as a last resort in service of process, the Department of State ("Department") may now be served. There is an ordering of the persons, upon whom service will be deemed effective, starting with the registered agent. If the registered agent does not exist or cannot be served after reasonable diligence, service may be made upon the manager of a manager-managed LLC or any member of a member-managed LLC, or upon the department, but again only as a last resort.
An LLC may now file a Statement of Authority ("SOA") SOA with respect to status (member or manager), or position (or office) of a person in the LLC, and may state the authority, or limitations on the authority, of all persons having such status or holding such position. SOAs are divided into two contexts: those pertaining to real property and those pertaining to everything else. An SOA to execute an instrument transferring/affecting real property in the name of the LLC requires a second-step "recording" of a certified SOA in the real property records office to provide constructive notice.
Under the New LLC Act, managers of manager-managed LLCs, and all members of member-managed LLCs, will be subject to a non-competition covenant. This is a waivable provision, and LLC managers and members will need to take due care to ensure it is properly addressed or waived in operating agreements.
The New Act provides several changes to the LLC legislation in Florida that are important for LLC managers and members alike. It is important that your operating agreement comports to such changes. If you have any questions, feel free to contact us at our office for assistance.
** Disclaimer Required by IRS Circular 230** Unless otherwise expressly approved in advance by the undersigned, any discussion of federal tax matters herein is not intended and cannot be used 1) to avoid penalties under the Federal tax laws, or 2) to promote, market or recommend to another party any transaction or tax-related matter addressed.