Florida law does not require LLCs to have an operating agreement, but your LLC should have one. Your operating agreement is the blueprint for your business and can make the process of doing business much smoother.
Here are some reasons having an operating is beneficial:
Beneficial for doing business – An operating agreement is often requested in certain business situations. For instance, title companies and attorneys request an operating agreement when your LLC is selling real estate, your account will request one when you are filing taxes for your LLC, potential investors with interest in your LLC will request one, and lawyers may request one when you inquire about legal assistance for your business.
Protect limited liability status – If any legal action is taken against your LLC, the court may request your operating agreement. An operating agreement will help ensure that the court recognizes the limited liability protection for the owners of your LLC. With an operating agreement, the court will be more likely to consider your LLC a legitimate business, separate from your personal accounts, and therefore the court is more likely to recognize that your LLC is the only liable party and not yourself.
Ownership percentage – The operating agreement is where you spell out the ownership percentage of the LLC. This is helpful for avoiding problems between owners about ownership percentage and financial issues.
Management – The operating agreement is where you dictate how the LLC will be managed and who the managers will be.
Profits and losses – The operating can explain the distribution of profits and losses and determine when distributions will be made.
Voting rights – The operating agreement spells out the voting power of the members.
Ownership transition and avoiding probate – The operating agreement can dictate what happens if a member dies, retires, or sells their interest in the LLC. A transfer on death provision in an operating agreement can avoid membership interest of an LLC from going through probate.
Avoid generic Florida LLC rules – If you do not have an operating agreement, then your LLC will be subject to default Florida rules, which may be antithetical to your needs. With an operating agreement, you can develop your own guidelines for your business.