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Florida’s Revised Limited Liability Company Act: Part I – The two Acceptable LLC Management Structures
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Florida’s Revised Limited Liability Company Act: Part I – The two Acceptable LLC Management Structures

November 19, 2013 Professional Services Industry Legal Blog

Reading Time: 3 minutes

This blog post is the first in a series of posts focusing on Florida’s Revised Limited Liability Company Act, which was passed into law in June 2013 and is codified in Chapter 605, Florida Statutes.  The Revised Act takes effect January 1, 2014 for all LLCs formed after that date.  For LLCs formed prior to 2014, the Revised Act becomes mandatory on January 1, 2015.  Although much of Florida law governing LLCs remains the same under the Revised Act, there are a few significant changes that managers and members of LLCs should be aware of and that may require revisions to existing operating agreements.  This post discusses the Revised Act’s elimination of the “managing member” concept for LLC management structures.

Florida’s prior LLC statutes allowed for a unique form of management structure in which one or more “managing members” could manage an LLC.  That structure often caused confusion and, therefore, the Revised Act eliminates that concept and allows for only two types of management structures going forward:  (1) member-managed or (2) manager-managed.  See Fla. Stat. § 605.0407; Fla. Stat. § 605.04072.  Under the Revised Act, a LLC is now considered a member-managed LLC unless the operating agreement or articles of organization expressly provide that (i) the LLC is or will be manager-managed, (ii) the LLC is or will be managed by third-party managers, or (iii) management of the LLC is or will be vested in managers.  Fla. Stat. § 605.0407(1)(a).

In a member-managed LLC, the management and conduct of the LLC are vested in the members.  In a manager-managed LLC, matters relating to activities and affairs of the LLC are decided exclusively by the managers, whether they are internal or an external third-party management group.  Fla. Stat. § 605.0407(2)-(3).  One change to make note of is that a member is not entitled to compensation, absent an agreement, for management services performed for a member-managed LLC, except for services related to the winding up of the LLC.  Fla. Stat. § 605.04072(4).

Because of these changes to the law concerning LLC management structures, existing LLCs may need to have their operating agreements reviewed and amended so as to avoid confusion and unwanted results. For example, existing LLCs managed under the now-eliminated “managing member” concept will be deemed to be member-managed.  This may cause some compensation-related issues pursuant to Section 605.04072(4), Florida Statutes, as mentioned above.  Furthermore, this could mean that many of the actions that were previously approved solely by the one “managing member” would now have to be approved by a majority vote of all the members.  In other words, the existing management structure could be undone with management authority unintentionally passing to all members under the Revised Act.

Due to these possible unintended consequences, it is recommended that existing LLCs, where one “managing member” is making all of the management decisions, have their operating agreements revised and/or amended to conform to the Revised Act’s new language.

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