Is Your Business at Risk?

http://www.floridabar.org/DIVCOM/JN/JNJournal01.nsf/8c9f13012b96736985256aa900624829/e000e018d4b1357685257bd4006aa1bc!OpenDocumentThe law applying to LLCs in the state of Florida is about to undergo a number of changes that will affect every single LLC that is currently doing business in the state of Florida, as well as those LLCs that have yet to be created by enthusiastic entrepreneurs.

The Florida Bar Journal recently published its first of four articles addressing the wide-ranging and numerous changes that LLCs in Florida-old and new-are about to experience in the next year and a half. In just over three months, the Revised LLC Act will go into effect in the state of Florida for any LLCs formed or registered to do business after January 1, 2014. The following year, on January 1, 2015, the current LLC Act will be repealed and any LLC that was in existence prior to January 1, 2014, will be subject to the Revised LLC Act.

The addition of approximately 54 new definitions to the Revised LLC Act will have an enormous effect on how LLCs are created and governed. For example, the Revised LLC Act now makes it clear that the default rule will be that all LLCs are member-managed, meaning that all members of the LLC will have apparent authority under the statute to bind the LLC. This can have serious consequences for those who are unaware of this change and can potentially result in the LLC becoming liable for a wide range of obligations, which might not have been the case under the old LLC Act.

The other addition is that under the Revised LLC Act, an LLC’s operating agreement, which typically serves as the “contract” under which an LLC operates, could inadvertently arise from e-mails, voicemails, and other modes of daily communication. Additionally, those operating agreements will now be subject to a number of new limitations, which the operating agreement cannot waive. Under the Revised LLC Act, it is clear that a situation could arise where an e-mail exchange could inadvertently produce an operating agreement that does not even meet the requirements under the new statute.

Arguably, the most important changes included in the Revised LLC Act deal with contributions, distributions, and their respective liabilities. Under the Revised LLC Act, a member may face consequences if he or she has promised to make a contribution to the LLC and does not fulfill that promise, and obligations to the LLC will not be excused due to death or any other inability to perform. New standards of conduct and their attendant consequences are also present in the Revised LLC Act, as a member or manager of an LLC (depending on the type) can actually incur personal liability if an improper distribution takes place and that person fails to comply with the new standards of conduct. Corporations are built upon the principle of limited liability, so such a change in the law is of enormous importance because of the potential for personal liability in certain situations.

A Florida attorney with knowledge of the aforementioned changes and who has experience in such matters is essential to a newly formed LLC-or even a well-established LLC-to assist in navigating the ever-changing laws and standards applicable to LLCs in the state of Florida. The experienced legal team at Chepenik Trushin LLP is ready, willing, and able to assist in forming a new LLC or to advise with regard to a preexisting LLC. Please do not hesitate to contact us.