Florida LLC Operating Agreement: Drafting Checklist

When starting an LLC in Florida, it’s essential to lay an organized foundation from the start. You need something to dictate your small business operations and help protect your LLC status from a default state law.

That’s where an LLC operating agreement comes in. We’ll walk you through the countless benefits a document like this offers and each piece you include in the drafting process.

Key Takeaways

• Under Florida’s laws, you’re not required to create a Florida LLC operating agreement when starting your company.

• Even though you’re not mandated to draft an agreement for your LLC, you should do so to avoid personal liability risks.

• A small business operating agreement contains basic company information, your members’ roles, responsibilities, and decision-making procedures.

What Is an LLC Operating Agreement?

An LLC operating agreement is a legal document that defines your business status and provides a roadmap for different procedures. For example, it outlines how to make financial decisions for your limited liability company. It also officially distributes duties among your members, acting as their North Star throughout your business dealings.[1]

This agreement contains similar information as another form you submit during your LLC formation — your Articles of Organization. It lists your business name, physical street address, and registered agent details, among other things.

If you’re a single-member LLC, drawing up an operating agreement should be straightforward since you’re the only key player involved in its creation. Drafting one as a multi-member enterprise isn’t difficult, either, but each member must sign off on the provisions in the document. As a result, you may need to harmonize it a bit to accommodate each other.

State Requirements

Ensuring good standing with the Florida Secretary of State can be tricky. First, you must submit your Articles of Organization to the Division of Corporations and maintain a registered agent. Once you take care of this, do any Florida statutes mandate you to draft an operating agreement?

No. You’re not required under any state law to create an operating agreement. According to the Florida Revised Limited Liability Act, whether or not you draw up this document is entirely up to you.[2] As a result, you won’t get in trouble with the Florida Department of State and other entities for not having one.

Just because an operating agreement isn’t obligatory doesn’t mean you shouldn’t create one. Lacking this document puts your enterprise at significant risk, as you’ll see in the upcoming section.

LLC Operating Agreement Benefits

Whether you’re a single-member or multi-member business entity, you should have an internal document to point you in the right direction. More importantly, you need something to protect your limited liability status.

That something is your LLC operating agreement. Here’s what makes it so beneficial:

Protecting Your Personal Assets

The IRS considers your company’s property and assets separate for income tax purposes.[3] Although you must file tax returns yearly, your private funds remain intact as an LLC owner. The state can’t go after your money if your enterprise incurs credit card fines and similar penalties.

However, LLCs without an operating agreement don’t look the same in the eyes of Florida courts as those with this internal document. If you don’t have one, the state might not consider your private and company assets separate. 

The easiest way to avoid this is to draft an operating agreement. Don’t let timing hold you back. You can create one both during and after your company’s formation. The only thing that matters is that you have this internal document as proof of your limited liability status.

Divvying Up Your Responsibilities

Proper work distribution lies at the heart of every successful LLC. Every member of your enterprise should be clear about their duties. Otherwise, one or two owners may not pull their weight, and the rest must work to compensate for it.

A great way to avoid this is to divide responsibilities from the get-go using your operating agreement. The document lists who does what in your organization to eliminate any confusion down the line. And since this document is legally binding after each party signs it, those who don’t carry out outlined duties risk being penalized by other members.

With a well-drafted operating agreement, everyone’s on the same page from day one. For example, you could prioritize marketing activities from your business plan while another member communicates with your partners. A cohesive, productive environment is more likely to thrive.

Increasing Business Stability

Once you form your business, the journey ahead can be mysterious. What happens should you decide to leave the enterprise? You don’t want just any member to take over. Instead, you might wish a family member to take your position, and your operating agreement lets you express this request.

This way, you reduce the uncertainty associated with being a business owner. You can use the same strategy for any other situation, not just membership changes. You can specify how you take out loans and break into new markets. Having written plans for different scenarios can help increase the stability of your business operations.

Who Needs an Operating Agreement?

Even though no Florida state law requires you to draft an operating agreement, creating this document yields tremendous benefits. These perks apply to all LLC business owners, regardless of their place of business or LLC formation date.

Therefore, entering into an operating agreement makes sense for:

• LLC owners who want to prevent state default rules from applying to their LLC formation

• Entrepreneurs running a sole proprietorship

• Owners of a business entity that may consider an S-corp a few years down the line

• People who want to distribute key responsibilities fairly (according to each member’s capital contributions)

Drafting Your Florida LLC Operating Agreement

Implicit or oral agreements rarely suffice in the business world. There’s no way to prove such deals to the Florida Department of State, Secretary of State, or other bodies. That’s why you need a written operating agreement.

The good news is that you have many options when drafting this legal document. For example, you can download and customize an online LLC operating agreement template. Alternatively, you can draw up your agreement from scratch.

Whatever you choose, take the following steps to formulate a comprehensive agreement.

Step 1: Provide Business Information

The first phase of the drafting process includes basic information about your enterprise. There’s no room for creativity here — you need to use the official details, such as those listed in your Articles of Organization. If discrepancies exist between the information in these two documents, you may have trouble proving your LLC formation’s validity and status.

So, don’t take a gamble. Include these points in your introduction:

• Business name — Use the full business name from your Articles of Organization. Don’t forget to include the term “limited liability company” or “limited company.” You can also use abbreviations: LLC, LC, L.L.C, L.C.

• Address — Tell the readers where your company is headquartered. Rather than use a P.O. Box, provide a physical street address of your firm.

• Registered agent — State the name of your registered agent, be it an individual or business entity. Also, add their registered office since this is where they receive service of process and other vital documents on your behalf.

• Employer Identification Number — Include this IRS-provided number.[4] Without one, you won’t be able to pay your state and federal taxes. Think of this number as your company ID.

Step 2: List LLC Members

Listing your LLC members shouldn’t take long if you have a single-member LLC. Your single-member LLC operating agreement should include your name, address, ownership interest, and voting rights. There’s no complex mathematics here because you own 100% of the company, meaning all voting rights are yours.

If there are multiple members of the LLC, you need to provide the following information for all managing members:

• Names and addresses of all business owners

• Membership interest (member contributions or ownership percentages) to ensure personal liability protection

• Voting rights of all members of an LLC, depending on their member contributions

Step 3: Decide Member-managed vs. Manager-managed

Your operating agreement should also include your decision to run a member-managed or manager-managed company. Selecting the right management approach depends on various factors, such as how much you want to be involved in your firm and if you want to attract investors.

On the one hand, member-managed management of the company is suitable if:

• You want to be fully involved in your organization.

• You don’t want to delegate some of your voting rights to third-party providers.

• You wish to retain total control over the decision-making process.

• You only want you and other members of the LLC to sign critical documents.

This management structure also has a few downsides:

• You’re required to perform day-to-day operations, so you may need to spend regular business hours at the office.

• You may have a more challenging time attracting investors because if they invest, they need to be heavily involved in your company.

On the other hand, manager-managed LLC management of the company is a great decision if:

• You don’t mind hiring professional managers to sign documents on behalf of the company and run daily operations.

• You want to free up your schedule.

• You wish to grow your enterprise by attracting passive investors.

Be sure to consider the downsides of a manager-managed LLC before you make the final call:

• It strips you of company control to a certain extent. Namely, managers may overstep their boundaries and enter into agreements without consulting you beforehand.

• There’s a risk of hiring a professional manager who doesn’t understand your vision, leading to costly mistakes.

Step 4: Lay Out Administrative Operations

This step is the crux of your operating agreement. It’s where you clarify how you go about various amendments, financial procedures, and other significant decisions. Use this part of your internal document to divide responsibilities among your business owners:

• How do the capital contributions of each LLC member affect their voting rights allocation? In other words, how big of a say do individual members have, depending on how much money they invested in the company?

• How will you meet the specific needs of your business plan to accomplish your objectives? Will you need to work less if your capital contribution is higher, or step in as the leader of all day-to-day operations and set an example for others?

• Who will perform administrative duties, such as sending the annual report and startup credit card filings?

• Do you plan on attracting additional capital? If so, how do you go about this process?

• Who’s in charge of profit distributions, disbursements, and other payments on behalf of the company?

Step 5: Add and Remove Members

The final stage of your internal document drafting tackles a particularly challenging topic — adding and removing members of an LLC. You can’t just recruit or remove members randomly. There must be specific guidelines because membership changes tremendously affect your legal entity.

Hence, make sure your operating agreement addresses the following areas:

• Do you base your decision to add or remove members on voting rights only?

• What member contributions are required to become a part of your company?

• How does adding new members impact the ownership percentages of the existing members?

• How does removing a business owner affect ownership for the remaining members?

• Who’s in charge of indemnification and buyout payments?

Keep in mind that adding and removing members are momentous changes. You need to amend your operating agreement by drafting a new document whenever they occur. Plus, every member must sign the new paper.

Create Your Operating Agreement Through a Filing Service

Drafting a Florida LLC operating agreement is a multi-stage process. After getting the approval of all your small business owners (members), you need to formulate each section carefully to make the most of your document. This can be stressful because you already have enough on your plate. So, why not lift this burden off your shoulders and outsource the drafting to Swyft Filings?

Whether you’re in the process of forming your LLC or you’ve already registered your organization, we’re here to help. Contact us, and we’ll draft your operating agreement, allowing you to focus on more exciting aspects of running a company.

Swyft Filings is one of the fastest LLC filing services around. Partner with us and streamline your formation process, including operating agreement drafting.

FAQs

Is an LLC Operating Agreement required in Florida?

No. You don’t need an LLC operating agreement to form your enterprise in Florida. It doesn’t subject you to fines, but this doesn’t mean you shouldn’t draft this document. It underpins your personal liability protection and helps clarify the roles of business owners.

How does an LLC Operating Agreement help protect my assets?

An LLC operating agreement helps protect your assets by reinforcing your LLC status. It demonstrates that you’re a separate entity from your enterprise, so the state of Florida can’t seize your personal property to settle disputes.

Who needs access to this document once it’s drafted?

Every member who signed your operating agreement should have access to the document after the drafting. They may want to revise their responsibilities or ensure they follow the proper decision-making procedures. Also, you may need to present your agreement in court in case of lawsuits.

How do I edit information on this document if membership changes?

To edit information on your operating agreement, you need approval from every member. Once they give you the green light, you must draft a new agreement reflecting your membership changes. Once each member signs the paper, the document becomes legally binding.

What other legal documents do I need to draft for my Florida LLC?

You only need Articles of Organization to form your LLC in Florida. Be sure the document contains vital information about your business, such as your full business name and address. Don’t forget to appoint a registered agent because not having one compromises your good standing with the state, and apply for an EIN to hire new employees and handle taxes.

Bibliography

1. Cornell Law School. “Legal Information Institute — Operating Agreement.” Accessed June 23, 2023.

2. Florida State Legislature. “The 2022 Florida Statutes.” Accessed June 23, 2023.

3. IRS. “Limited Liability Company.” Accessed June 23, 2023.

4. U.S. SBA. “Get federal and state tax ID numbers.” Accessed June 23, 2023.