What You Need to Know About Florida LLC Management Structures

What You Need to Know About Florida LLC Management Structures

Once you have made the decision to form a limited liability company (LLC), you will need to choose how it will be managed. You have the choice of operating as either a member-managed LLC or a manager-managed LLC.

Member-Managed LLCs

In a member-managed LLC, each member participates in the daily management of the company and is authorized to act as an agent of the company. Each member is able to sign contracts on behalf of the company and perform other managerial duties, which are typically outlined in the operating agreement.

In Florida, unless otherwise provided for in the articles of organization or operating agreement, all LLCs are presumed to be member-managed.

Manager-Managed LLCs

When LLC members prefer to be passive investors rather than active managers, they may elect to operate as a manager-managed LLC. In this type of structure, management is delegated to a group of members or a third party manager. This type of management structure may also be preferable when there are a large number of members.

The LLC’s limited liability protection extends to both managing and non-managing members. Profits are divided and distributed to members according to the LLC’s operating agreement. The most common scenario is basing distributive shares on each member’s percentage of interest in the LLC.

In addition, managing members must pay the self-employment tax on their distributive share, while non-managing members are not required to pay this tax.

Once you have made the decision on the management structure for the LLC, it is critical to have it documented in an LLC operating agreement. The operating agreement should also set forth the specifics on how the company will be managed, including who has the power to make operating decisions for the LLC, as well as member voting rights, buy-out provisions, and other important operational and management issues.

Business owners seeking to protect their business interests should seek a qualified, competent advisor for assistance. Contact one of the experienced Florida business attorneys at Jurado & Farshchian, P.L., at (305) 921-0440, or email us at info@jflawfirm.com. We offer free consultations to business owners seeking to find the right attorney to meet their business’ legal needs.

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