If you are operating a Limited Liability Company (LLC) in the state of Florida, you are not required by law to have an operating agreement. However, it is recommended that you have one. This is a document that defines the business’ structure and rules of operation. A well-written operating agreement will regulate each member’s rights and duties, how business decisions are arrived at, accounting methods, how the business will respond to membership withdrawal and much more.
In the absence of an operating agreement, the rules set out by Florida statutes will apply. These generic rules capture a wide array of cases and, thus, are not optimized for specific business needs. Besides, if you don’t have these rules written down, then an implied, oral or recorded operating agreement may stand in its place. This can leave room for different interpretations, conflicts and misunderstandings between members, which may be detrimental for the business.
There are many reasons why you should have an operating agreement for your LLC in Florida. Here are some of them:
Dispute resolution
You have just started your business, so you may not have many disputes – yet. However, it is given that a dispute will arise down the road. A well-written operating agreement sets forth terms of reference, which can reduce the possibility of disputes. And should a dispute arise, the agreement will outline the dispute’s handling. This is key to minimizing animosity between involved parties.
Outline future business growth
Every business wants to grow and make more money. At some point, the business may need to partner with another entity to do so. However, this could be difficult in the absence of a clear structure. An operating agreement can include plans for future growth and expansion without there needing to be a change in management or the voting structure.
An operating agreement outlines how a business is run. This document is different from business formation documents. While an operating agreement is not a mandatory requirement, having one in place can benefit your business in many ways.
