Malcolm Rivera
The management structure of a Florida LLC can be member-managed, manager-managed, or a combination of both. In a member-managed LLC, all members participate in the management of the company and have the authority to make decisions on its behalf. In a manager-managed LLC, the members elect managers and vote on key events, but the managers are responsible for the day-to-day operations of the company. Managers can be members of the LLC, a non-member third party, or even another business entity, depending on state laws. The Florida Revised Limited Liability Company Act, which came into effect in 2014, considers all LLCs to be member-managed unless specified otherwise in their operating agreement. This agreement outlines the management structure, decision-making processes, and the roles and responsibilities of managers. Therefore, being a manager of a Florida LLC does constitute doing business, as they are responsible for the company's operations and have the authority to make decisions.
| Characteristics | Values |
|---|---|
| Management options | A manager can be a member or a non-member third party, or another business entity. |
| Management structure | Member-managed, manager-managed, or a combination of both. |
| Manager's role | To attend to various business matters on behalf of the company, within legal limitations. |
| Manager's authority | Specified in the operating agreement. |
| Manager's expenses | Additional expenses, including salary, are required. |
| Operating agreement | A detailed document that lays out the day-to-day functioning of the company, procedures for decision-making, and conflict resolution. |
| Management selection | Can be specified in the operating agreement. |
| Management replacement | Can be specified in the operating agreement. |
| Florida Revised Limited Liability Company Act | Came into effect on January 1, 2014, removing the concept of a managing member. |
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What You'll Learn
Manager-managed LLCs
In Florida, a manager-managed LLC is a type of business structure where the company's management is handled by a designated manager or managers. This structure is commonly used for larger limited liability companies with multiple members or investors. In this setup, the manager can be a member of the LLC, a non-member third party, or even another business entity, as long as it is properly formed and maintained.
One of the key advantages of a manager-managed LLC is that it allows for a clear division of roles within the company. The manager or managers are responsible for the day-to-day operations and decision-making, while the members can be passive investors or actively involved in specific areas of the business. This structure is particularly useful for family-owned businesses, where parents may want to retain control while involving their children as passive members.
When forming a manager-managed LLC in Florida, it is essential to establish an Operating Agreement. This agreement should outline the roles and responsibilities of the manager(s), as well as the procedures for their selection, replacement, and resignation. It should also address conflict-of-interest scenarios and decision-making protocols. The Operating Agreement serves as a governing document, providing clarity and guidance for the company's operations and management.
It is worth noting that, in Florida, there is no state requirement for an LLC to be member-managed. By default, LLCs in Florida are considered member-managed under the Florida Revised Limited Liability Company Act (Chapter 605), which took effect in 2014. This Act eliminated the concept of a "managing member", giving all LLCs a member-managed status unless specified otherwise in their Operating Agreement. Therefore, when forming an LLC in Florida, it is crucial to carefully consider the management structure that best suits the company's needs and make the appropriate designations in the Operating Agreement.
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Member-managed LLCs
In a member-managed LLC in Florida, all members are involved in the decision-making process and each member acts as an agent of the LLC. This means that every member has the authority to make decisions on behalf of the company, although certain issues, such as loan agreements and contracts, must be decided by a majority of members. Each member usually has an equal say in the company's operations unless the entity's operating agreement states otherwise.
The operating agreement is the controlling document and should specify how decisions will be made, as well as the breakdown of management, who management will be vested in, and what the duties of management will be. It should also outline how managers can be selected and replaced, how they can step down, and how conflicts of interest will be handled.
In Florida, there is no state requirement for an LLC to be member-managed, and the management structure should be determined by the needs of the business.
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Manager roles and responsibilities
A manager of a Florida LLC can be either a member or a non-member third party, and a member is not required to be a manager. The manager of an LLC is responsible for the day-to-day management of the company, including making business decisions, overseeing operations, and handling finances and transactions. They are also responsible for marketing, logistics, and legal concerns.
The manager's duties and authority should be clearly specified in the LLC's operating agreement, which should also outline the rights and responsibilities of any managing members. The operating agreement should also cover how managers can be selected and replaced, how they can step down, and how conflicts of interest will be handled. It is important to carefully consider the management structure of the LLC, which can be member-managed or manager-managed. In a member-managed LLC, all members participate in the management of the company and have the power to make decisions on its behalf, although some important decisions may require majority approval. In a manager-managed LLC, another person or entity is appointed as the manager, which can be ideal when some members prefer a passive ownership role or are investors who do not want to be involved in day-to-day management.
Managers of LLCs owe fiduciary duties and can be personally liable if they breach these duties. They may receive salaries or management fees for their services. The management structure chosen will depend on factors such as the company's industry, nature of operations, and business goals.
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Manager selection and removal
The ideal time to decide on the management structure of your LLC is before the business starts operating. In Florida, an LLC can be managed by its members or by a professional manager hired by the LLC's members. There is no state requirement for an LLC to be member-managed.
In a member-managed LLC, all members are involved in the decision-making process and can make decisions on the company's behalf. However, some important company decisions may require majority approval from the full membership. Typically, a member's vote carries weight in proportion to their percentage share in the company.
In a manager-managed LLC, a single manager or managers are appointed to handle the daily operations of the company. This structure is particularly useful when some members want to be part of the daily operations, while others want to be solely investors.
The Operating Agreement should specify the selection and removal of managers, how managers can step down, and how conflicts of interest will be handled. For instance, the Operating Agreement may require unanimous approval or a simple majority for the selection of a manager. It should also address how a lack of confidence in management will be addressed.
Managers can be members of the LLC but are not required to be. A manager can also be a non-member third party or another business, including another LLC, as long as both entities are properly formed and maintained.
Managers may be chosen by the consent of the member or members holding more than 50% of the current percentage or other interest in the profits of the LLC. Similarly, a manager may be removed at any time without notice or cause by the consent of the members holding more than 50% of the current percentage or other interest in the profits of the LLC. A manager remains liable for any debt, obligation, or other liability to the LLC or members that they incurred while in their role.
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Operating agreements
An operating agreement is a critical internal document for a Florida LLC as it dictates the company's organisational structure and decision-making processes. It is not required to form an LLC with the Florida Department of State, but it is highly recommended. A strong operating agreement should address the following:
- LLC ownership: This includes who the members are, their membership percentages, and their capital contributions.
- Rights and responsibilities of members: Outline the roles of management, how managers can be selected and replaced, how managers can step down, and how conflicts of interest will be handled.
- Management structure: Specify the person or persons who will be managing and how decisions will be made. This can be either member-managed or manager-managed. In a member-managed LLC, all members participate in the management of the company and have the ability to make decisions on its behalf. In a manager-managed LLC, one or more designated people (managers) have the authority to make certain decisions and enter into contracts without a vote by the members.
- Amendment process: Detail how members can buy in or sell out of the LLC, and what happens if a member leaves.
- Distribution of assets: Outline how assets will be distributed if the company dissolves.
- Taxation: How your LLC will be taxed.
An operating agreement is a vital tool for reinforcing your limited liability protections and helping to settle future internal disputes. It can also help show that your business is a separate legal entity, protecting your personal assets from business debt.
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Frequently asked questions
In a member-managed LLC, all members participate in the management of the company and have the ability to make decisions on its behalf. In a manager-managed LLC, the members are not active participants and instead elect managers to run the company on their behalf.
Yes, a manager can be a member of the LLC. Alternatively, a manager can be a non-member third party or another business entity, such as another LLC.
The ideal time to decide on a management style is before starting your business. The management style you choose will depend on factors such as the number of members, the company's size, and the level of involvement of each member.
Your LLC's operating agreement should specify the management style of your company and outline the roles and responsibilities of each manager. It should also include rules and procedures for selecting managers, their resignation and removal, and the course of action in the event of a dispute.
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