Brundage Law P.A.

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Could an operating agreement benefit your Florida LLC?

On Behalf of | Jul 10, 2023 | Business Litigation |

New and existing limited liability companies (LLCs) need formal agreements or contracts to define the unique terms of their associations with other people and businesses. For example, you may have employment contracts to manage your workers and vendor agreements to secure your supply chain.

These contracts can protect your company from hardships while enhancing your operations, but that might not be all your business needs. An LLC operating agreement may do even more to safeguard your company from legal and operational threats, especially if you are not the sole owner or member.

What can you put in an operating agreement?

While not typically mandated in Florida, LLC operating agreements address the internal workings of your business operations and decision-making process. They also serve as a platform to establish company policies and procedures.

Examples of provisions many include in their operating agreements:

  • Ownership percentages
  • Member distributive shares (profits, losses, etc.)
  • Voting responsibilities and rights
  • Options for addressing disputes (mediation, arbitration, etc.)
  • Member powers and duties

Operating agreements may also contain procedural rules for when one member wants to disentangle themselves from the business (sellout and buyout rules).

Can it reduce your liability?

A well-drafted operating agreement can increase the liability protections inherent in an LLC. For example, it may help prevent a disgruntled individual looking for a payout from claiming you operate more as a sole proprietorship than a limited liability company.

Unfortunately, your business agreements are only as strong as their creation. A misplaced word or improper turn of phrase could leave you open to legal trouble. For this reason, it is generally smart to have all your business agreements drafted or reviewed by someone with legal knowledge.