LLC Member Rights

What are LLC member rights?

Limited liability company (LLC) member rights may vary depending on the specific operating agreement of the LLC. Still, members of an LLC generally have certain rights and privileges, including rights to vote, profits, distributions, information, management participation, and ownership transfers.

Need help with a matter related to LLC member rights? Schedule your consultation today with a top shareholder disputes and derivative litigation attorney.

In Florida, which laws and regulations apply to LLC member rights?

In Florida, LLC member rights fall under the Florida Revised Limited Liability Company Act (FRLCA), part of the Florida Statutes. The FRLCA sets out the default rules for LLCs in Florida, but the LLC’s operating agreement can modify these rules. Critical provisions of the Act include the following:

Voting rights: Under Stat. § 605.04703, each member of an LLC is entitled to one vote on matters affecting the LLC unless the operating agreement provides otherwise.
Management rights: Under Stat. § 605.0407, unless otherwise specified in the operating agreement, all members of an LLC have the right to participate in the company’s management.
Right to information: Under Stat. § 605.0410, LLC members have the right to access certain information about the company’s financial and business operations, including the right to inspect and copy the company’s books and records.
Right to distributions: LLC members are entitled to receive distributions of the company’s profits, according to their ownership percentage, unless the operating agreement provides otherwise.
Right to transfer ownership: LLC members have the right to sell or transfer their ownership interests in the company, subject to any restrictions outlined in the operating agreement under Stat. § 605.0502.

What are common issues regarding LLC member rights that could lead to litigation?

LLC member disputes can arise for various reasons, and when members’ rights are infringed upon or disregarded, it can result in litigation. Here are some common issues that can lead to litigation in Florida:

Breach of fiduciary duty: LLC members owe each other fiduciary duties, including the duty of loyalty and the duty of care. If one member breaches their fiduciary duties, such as taking actions that benefit themselves at the company’s or other members’ expense, it can lead to litigation.
Disputes over management: Management disagreements occur when LLC members disagree over the company’s management, including expenditures and decision-making processes.
Disputes over ownership interests: Disputes may arise over the ownership interests of LLC members, such as when a member sells their interest to a third party or transfers it to another member in violation of the operating agreement or state law.
Disputes over distributions: LLC members may dispute the amount or timing of profit distributions or whether the company should make such distributions.
Breach of operating agreement: LLC members may sue each other for breach of the operating agreement, which can include violations of specific provisions such as restrictions on the transfer of ownership interests or requirements for member voting.

When a set of facts is appropriate to cause lead to disagreement about LLC member rights, there are many paths a claimant may take. We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path forward to seek appropriate remedies.

To determine whether your unique situation may necessitate litigation, please contact our office to set up your initial consultation.

What evidence does a plaintiff generally need to file a lawsuit regarding LLC member rights, and what are common legal defenses to those claims?

To successfully file a lawsuit regarding LLC member rights, a plaintiff must provide evidence that shows a violation of the member’s rights or a breach of the operating agreement. Here are some examples of evidence that may be required:

Operating Agreement: The operating agreement is a critical document that outlines the rights and responsibilities of LLC members. It will be essential to review the operating agreement and provide evidence showing how the defendant’s actions breached the terms of the agreement.
Meeting Minutes: Meeting minutes can provide evidence of discussions and decisions made during LLC meetings. Minutes often support claims of breach of fiduciary duty or breach of the operating agreement.
Financial Statements: Financial statements can help to show whether the defendant has improperly taken funds or distributed profits in violation of the operating agreement or state law.
Correspondence: Correspondence between members, such as emails or letters, can be used to show that the defendant acted improperly or failed to follow the terms of the operating agreement.

Common legal defenses to claims related to LLC member rights may include:

Operating Agreement: The operating agreement may limit the plaintiff’s rights or provide a mechanism for resolving disputes the plaintiff failed to follow.
Lack of Standing: If the plaintiff is not a member of the LLC, they may not have standing to bring a claim related to member rights.
Lack of Evidence: If the plaintiff cannot provide sufficient evidence to support their claims, the defendant may argue that the case should be dismissed.

To see what actions or defenses may be available for your unique situation, please contact our office to set up your initial consultation.

Frequently Asked Questions

What is an operating agreement?

An operating agreement is a legal document that outlines the ownership and management structure of an LLC. It may include provisions related to LLC member rights, such as voting rights, management responsibilities, and distribution of profits.

Can LLC member rights be modified?

The LLC’s operating agreement can modify LLC member rights. Florida law outlines general rules for LLCs to consider, but the operating agreement can change these rules better to suit the needs of the LLC and its members.

What should I do if I believe my LLC member rights have been violated?

If you believe your LLC member rights have been violated, reviewing the LLC’s operating agreement and gathering evidence to support your claims is essential. In addition, you may wish to consult with an attorney with experience in LLC member disputes to discuss your options for resolving the issue.

What is a fiduciary duty?

A fiduciary duty is a legal obligation to act in the best interests of another party. In the context of an LLC, members owe each other fiduciary duties, including the duty of loyalty and the duty of care. These duties require members to act in good faith and with reasonable care when making decisions that affect the company and its members.

Have more questions about an LLC member rights-related situation?

Crucially, this overview of LLC member rights does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circumstances.

Jimerson Birr attorneys guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively.

Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain a tireless advocate every step of the way. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant.

If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to schedule a consultation.