The Business Law Section of the Florida Bar Association recently discussed and examined proposed changes to the Florida Limited Liability Company Bylaws at its Annual Retreat. The two main areas being considered are the absence of specific predetermined protocols and procedures that would apply to dissolution laws, and provisions allowing for the award of attorneys’ fees and costs incurred in such actions that have been determined to be started in bad faith. Unlike the Florida Corporate Code, which contains such default provisions, the Florida Limited Liability Company Statutes currently do not.
The default protocols for LLC dissolution actions are still being developed, but the Commercial Litigation Committee unanimously opposed the inclusion of any fee provision, finding that such a provision would cause more litigation than it would resolve. In addition, the Committee recognized that there are other provisions in Florida law to provide necessary protections for litigants. Some other changes that will be considered in the near future are specific jury instructions for commercial litigation cases, rewrites of non-compete statutes, and updates to the Florida Arbitration Code.
Limited Liability Companies, as something of a hybrid between a corporation and a partnership, have become the entity of choice for many small businesses over the past decade. Most business lawyers acknowledge that the significant deficiency in that body of law is the absence of strong default provisions. Because many owners form their LLCs directly, they often do not use or create an operating agreement. Unfortunately, if disputes later arise between business owners, there is a distinct absence of agreed upon procedures and legal guidelines to resolve such situations. This can quickly turn an otherwise resolvable dispute into an expensive lawsuit, possibly leading to the legal dissolution of the business and the loss of all goodwill and assets.
The most appropriate method of avoiding these scenarios is to engage a competent and experienced business attorney to craft an operating agreement appropriate to the parties’ particular and unique circumstances. While generic documents can be easily found online, those documents may not fully apply to the special circumstances of a given business. The difference between generic documents and those produced for a company is analogous to buying a suit off the rack vs. a made-to-order suit. In the final analysis and until the Florida Limited Liability Company Statutes are revised, the best plan to follow is Ben Franklin’s famous quote that “an ounce of prevention is worth a pound of cure.”
