Manager vs Member Managed Florida LLC

Manager vs Member Managed Florida LLC

When an LLC has a managing member, that member is in charge of managing the company. The managing member is assigned by the other LLC members to carry out this task. In contrast, a member-managed LLC is one in which each member participates in managing the LLC. In the state of Florida, an act called the Florida Revised Limited Liability Company Act has eliminated the concept of a managing member. For this reason, every Florida LLC with a managing member is now considered a member-managed LLC.

Managing Your Florida LLC

When forming your Florida LLC, you have the choice of forming a multiple-member LLC or single-member LLC. Whichever LLC type you choose will have specific tax implications, so be sure to choose the right management structure for your company. If you are uncertain in this decision, consult an LLC attorney.

If your LLC is manager-managed, then the members have chosen to delegate decision-making to a manger. The manager can be an individual chosen from the member group or an individual outside of the company. Additionally, there is the option of assigning another LLC or corporation to serve in the manager role.

If your LLC is member-managed, on the other hand, then all of the members participate in the management of the company. This means that every member has the ability to make decisions on the company’s behalf. However, there may be some important company decisions that require majority approval from the full membership. Typically in a member-managed LLC, a member’s vote carries weight in proportion to their percentage share in the company. Also, when members hold a majority interest in the company, they hold the ability to approve all decisions.

If you do not designate a specification for your LLC, then the state assigns your LLC a member-managed status. This is the default classification in the state of Florida.

Regardless of the management structure you choose, it is important to draft a thorough operating agreement that covers the daily operations and procedures of the company to guide decision-making. This can be especially important if your company has multiple managers, as you will want to clearly define the role of each to avoid complication and dispute.

In addition, your operating agreement should detail the procedures for handling disputes, selecting managers, resignation or removal of managers, and any other matters that will ensure efficiency and cohesion within your organization.

Understanding the Florida Revised Limited Liability Company Act

The Florida Revised Limited Liability Company Act (Chapter 605 in the Florida Statutes) took effect at the beginning of 2014. The repeal of the old act (Chapter 608) took effect at the start of 2015, at which point all Florida LLCs were governed by the new act and considered member-managed LLCs. The act affected all LLCs regardless of their registration or formation dates.

The new act is similar in several ways to the old act, as many of its provisions were retained. Additionally, several new concepts were incorporated, as well. The purpose of the new act was to bring uniformity to LLC governance across various states, add clarity to court decisions, and make Florida an appealing location for forming and operating an LLC.

By removing the concept of a managing member, the new act considers all LLCs to be member-managed. Through the operating agreement of the LLC, however, a member may be elected to serve the role of manager. Additionally, there is the option of stipulating this election in the LLC’s articles of organization. If there is no such election by the members, then the new act rules determine the LLC to be member-managed by default.