Operating Agreement Essentials for Multi-Member LLCs

Florida law does not require a limited liability company to have a written operating agreement. But for any multi-member LLC, operating without one is a significant risk. The operating agreement is the governing document that defines the rights and obligations of the members, the management structure, and the rules for how the business will operate.

Ownership and Capital Contributions

The operating agreement should clearly state each member's ownership percentage and their initial capital contribution. It should also address what happens if additional capital is needed and the consequences of a member's failure to make a required capital contribution.

Management Structure

Florida LLCs can be member-managed or manager-managed. The operating agreement should specify which structure applies and define the scope of the manager's authority. Certain decisions — such as admitting new members, selling the company, or taking on significant debt — should typically require unanimous or supermajority member approval.

Transfer Restrictions and Buy-Sell Provisions

Without transfer restrictions and buy-sell provisions, a member's interest could end up in the hands of an unwanted third party. A well-drafted operating agreement will include right-of-first-refusal provisions and a mechanism for valuing and purchasing a departing member's interest.

The Bottom Line

A generic operating agreement downloaded from the internet is not a substitute for a document tailored to your specific business. The Law Office of Carl G. Hawkins, PLLC drafts operating agreements for Florida LLCs as part of its business formation practice. Contact the firm to discuss your entity's needs.