What records must a Florida limited liability company (”LLC”) maintain?

The purpose of this article is to explain the basic records requirements of a LLC under Florida law. A LLC is the preferred type of entity for many start-up businesses, especially those engaging in entrepreneurial and ecommerce ventures.

What is the law?

Section 608.4101, Florida Statutes (Records to be kept; right to information), sets forth the record requirements for a Florida limited liability company. Section 608.4101 states, in part, as follows:

(1)Each limited liability company shall keep at its principal office the following records:

(a) A current list of the full names and last known business, residence, or mailing addresses of all members, managers, and managing members.

(b) A copy of the articles of organization, all certificates of conversion, and any other documents filed with the Department of State concerning the limited liability company, together with executed copies of any powers of attorney pursuant to which any articles of organization or certificates were executed.

(c) Copies of the limited liability company’s federal, state, and local income tax returns and reports, if any, for the 3 most recent years.

(d) Copies of any then-effective operating agreement and any financial statements of the limited liability company for the 3 most recent years.

(e) Unless contained in the articles of organization or the operating agreement, a writing setting out:

1.The amount of cash and a description and statement of the agreed value of any other property or services contributed by each member and which each member has agreed to contribute.

2.The times at which or events on the happening of which any additional contributions agreed to be made by each member are to be made.

3.Any events upon the happening of which the limited liability company is to be dissolved and its affairs wound up.

Key Issues

One of the advantages of forming a Florida limited liability company is that the statutory records requirements are substantially less onerous than the requirements for a Florida corporation. With a Florida corporation, the annual records requirements included minutes of annual meetings of both the shareholders and Board of Directors.

In addition, the records requirements for a Florida limited liability company allow the members of the LLC to maintain privacy about the internal business affairs of the company. The LLC’s Operating Agreement is an internal document for the use of the members and managers. The Operating Agreement is not filed with the Secretary of State.

How to stay out of trouble

Although straightforward and simple, the records requirements specified in Section 608.4101 mandate that a LLC maintain specific records (copies of the Articles of Organization, documents filed with the Secretary of State, tax returns, the then-existing Operating Agreement, etc.). In order to comply with Florida law, I recommend that you meet each of these specific requirements. Please note that the records requirements do not require annual minutes.

Since the initial formation of a Florida LLC is such a simple process, the second step of the process is often not done properly – preparing an Operating Agreement. Although Florida law does not require that an Operating Agreement be in writing, I highly recommend it. Without a clear, written Operating Agreement, the right and obligations of the members and managers are subject to dispute. Inevitably, a dispute about the rights and obligations of the parties will arise at an inopportune time and may potentially cripple the LLC.

Finally, Florida law requires that a LLC provide members and their agents and attorneys with access to the LLC’s records. I recommend that a LLC provide its members with an annual update of the company’s activities including a copy of the tax returns. Routinely providing this information will go a long way toward maintaining harmonious relationships among the members of the LLC.

About the Author

Fred Reilly became an attorney in 1986 and is a Member of the California Bar Association, District of Columbia Bar Association, and Florida Bar Association. Mr. Reilly is also a Solicitor and Member of The Law Society of the United Kingdom.

He is admitted to practice before the United States Supreme Court and United States Court of International Trade.

Mr. Reilly graduated from The London School of Economics and Political Science (Master’s degree in International Business Law), The Cumberland School of Law at Samford University (J.D.) and The Krannert School of Management at Purdue University (B.S. Management).

He practices international business and eCommerce law. Mr. Reilly frequently travels to Florida, California, London, and Moscow.

Important Notice

This purpose of this blog is to inform and not to advise. The statements are general and individual facts in any given situation may alter their application or involve other laws not referred to here. You should always seek advice from a competent professional if any questions arise.

I’ve decided to take a stand.

In ten days, I’ll board a bus in Orlando and travel to Washington, D.C. to participate in the Restoring Honor event at the Lincoln Memorial on August 28, 2010. I’ll be joining the Special Operations Warrior Foundation, Glenn Beck, Sarah Palin, and other patriotic Americans who embody our nation’s founding principles of integrity, truth and honor.

Why am I making this journey?

Words cannot express the depth of my outrage. But let me try….

I am deeply alarmed by the direction of our nation and how far we have strayed from the principles of the Founding Fathers.

I find stunning hypocrisy in a President who systematically circumvents, evades, and denigrates the very Constitution he swore to uphold and defend.

I vehemently disagree with the Obama Administration’s wealth redistribution agenda, their job-killing policies that are rapidly destroying American capitalism, and their daily assault on the American Dream.

In a nation founded on our fundamental adherence to the rule of law, we now have an Administration that is absolutely committed to granting amnesty to illegal aliens, holding criminal trials for Islamic terrorists who killed 3,000 Americans, shielding New Black Panther Party criminals from prosecution, and granting special privileges to labor unions. The same Administration tramples with impunity on the rights of American citizens on a daily basis.

I can no longer remain silent when the President insults and alienates allies like the United Kingdom and Israel, then openly coddles foreign dictators like Hugo Chavez and Mahmoud Ahmaninejad.

I fundamentally oppose the Obama-Pelosi-Reid bailouts, Stimulus Plans, and generational theft which threaten our fiscal survival.

I am livid about a government that routinely treats its citizens with contempt, arrogance, and condescension.

I can no longer tolerate a divisive Presidential Administration that plays class and racial politics whenever expedient, routinely slanders dissenting citizens as racists, and never misses an opportunity to rule against the will of the American people.

I am absolutely appalled by the backroom deals, bribes, kickbacks, manipulations, deceptions, and bald-faced lies of Obama and the Democratic Congress in passing the Health Care and Financial Reform monstrosities. And no one ever bothered to read the 2,000+ page bills before voting – the most fundamental dereliction of a legislator’s duty.

I absolutely reject the politically-correct elitists who tell me that “One nation, under God” is no longer acceptable, yet instantly accuse me of intolerance for objecting to an Islamic mosque at Ground Zero.

I cannot be passive when an American President embarks on a world apology tour and methodically seeks the fundamental transformation of this nation.

I have always believed in personal responsibility, integrity, discipline, hard work, and the concept of American exceptionalism. In a nutshell, I believe in America. But now I’m mad as Hell and I’m not going to take it anymore.

On August 28, 1963, Martin Luther King, Jr. stood on the steps of the Lincoln Memorial and said these immortal words: “I have a dream that my four little children will one day live in a nation where they will not be judged by the color of their skin, but by the content of their character.”

It’s time that content of character matters again in America. So I’ve decided to take a stand and travel to Washington. I encourage you to stand with me on the steps of the Lincoln Memorial on August 28, 2010 and help restore America‘s honor.

In ramming Obamacare through Congress against the will of the American people, the drafters of the Patient Protection and Affordable Care Act made an incredible and possibly fatal mistake: The Obamacare bill that President Obama signed into law did not include a severability provision.

A severability provision is commonly included in a proposed law prior to enactment so that in the event a court strikes down one section of the law as unconstitutional, then the remainder of the law will remain intact. Without the inclusion of a severability provision in a law, a court’s determination that any one section of the law is unconstitutional will result in the entire law being thrown out.

In my opinion, it is Bill Drafting 101 to include a severability provision in a piece of legislation. With so many lawyers in Congress, it is utterly amazing that they failed to include this provision – talk about legal malpractice on a massive scale!

There are several cases now pending in federal court challenging the constitutionality of Obamacare, including a joint lawsuit filed by state attorney generals (including Florida Attorney General Bill McCollum). The principal arguments in the joint lawsuit filed by state attorney generals are that the new healthcare reform package exceeds Congress’s powers to regulate commerce, violates 10th Amendment protections of state sovereignty, and imposes an unconstitutional direct tax.

In addition, the attorney generals have taken the position that the failure to include a severability provision in Obamacare should result in the entire law being thrown out if the Supreme Court ultimately rules that one aspect of the law is unconstitutional.

What do I think will happen? I’m firmly convinced that the United States Supreme Court will ultimately rule that at least one aspect of Obamacare is unconstitutional and will also rule that the entire law fails due to the lack of a severability provision.

On a related note, a severability provision is also included in well-drafted contracts to prevent a court from invalidating the entire contract due to one unlawful provision. If you have a contract law question, call me.

ABOUT THE AUTHOR

Fred Reilly became an attorney in 1986 and is a Member of the California Bar Association, District of Columbia Bar Association, and Florida Bar Association. Mr. Reilly is also a Solicitor and Member of The Law Society of the United Kingdom.

He is admitted to practice before the United States Supreme Court and United States Court of International Trade.

Mr. Reilly graduated from The London School of Economics and Political Science (Master’s degree in International Business Law), The Cumberland School of Law at Samford University (J.D.) and The Krannert School of Management at Purdue University (B.S. Management).

He practices international business and eCommerce law. Mr. Reilly frequently travels to Florida, California, London, and Moscow.

IMPORTANT NOTICE
This purpose of this blog is to inform and not to advise. The statements are general and individual facts in any given situation may alter their application or involve other laws not referred to here. You should always seek advice from a competent professional if any questions arise.

I’m a big proponent of teaching high school students about business issues and encouraging entrepreneurship. So with the start of school just around the corner, here’s a novel idea. Tell your budding entrepreneur about five new online high school courses focused on technology and business innovation, including:

* Audio engineering

* Digital arts

* Introduction to Entrepreneurship

* Introduction to Marketing

* Green Design and Technology

The courses are available through Giant Campus (www.giantcampus.com), a nationally recognized leader in innovative technology education programs for youth and adults. At Giant School Academy, online classes are taught by Giant Campus instructors where student around the world can earn a high school degree or take classes al la carte.

The purpose of this article is to explain Presuit Mediation and how inclusion of a Presuit Mediation provision in your business contract can help you avoid costly litigation in the future.

A. What is Presuit Mediation?

Presuit Mediation is an informal process where the parties meet with an impartial mediator in an attempt to address disputes and reach a mutual agreement resolving the disputes.

Section 44.1011(2), Florida Statutes, defines “mediation” as a process whereby a neutral third person called a Mediator acts to encourage and facilitate the resolution of a dispute between two or more parties. It is an informal and non-adversarial process with the objective of helping the disputing parties reach a mutually acceptable and voluntary agreement. In mediation, decision-making authority rests with the parties. The role of the Mediator, includes, but is not limited to, assisting the parties and identifying issues, fostering joint problem-solving and exploring settlement alternatives.

Presuit Mediation has significant advantages over court-ordered mediation. Presuit Mediation occurs before costly litigation has ever been commenced and is handled outside the judicial system. Unlike court-ordered mediation, Presuit Mediation is not required to comply with the Florida Statutes and the Florida Rules of Civil Procedure requirements.

In addition, communications between the parties in a Presuit Mediation are entitled to confidentiality protections.

B. What are the compelling reasons for Presuit Mediation?

1. Cost. As a business person, would you rather (a) initiate and conduct an informal mediation conference within thirty days of a dispute arising, or (b) write the check for a team of attorneys to litigate the dispute over the course of the next year?

2. Speed. In the Presuit Mediation provision, the parties can specify the time period in which the mediation conference will be initiated. For example, the parties can specify that the conference will be held within thirty days of a party requesting mediation.

3. Informality. The mediation conference can be held in one of the parties’ offices or in the conference room of the mediator. Contrast one of these informal settings with the formality of an imposing courtroom complete with attorneys, a judge and jury.
4. The parties control the process. In a mediation conference, the parties are at liberty to tell their stories and negotiate a resolution in an informal, private setting without a judge or rigid rules dictating the process.

5. Confidential. A trial is open to the public. A mediation conference is a private meeting in which the parties are obligated to maintain confidentiality.

C. How is Presuit Mediation implemented?

The parties can simply include a Presuit Mediation provision when negotiating the terms of a business contract.

The Presuit Mediation provision should address how the mediator is selected, how the mediation conference will be conducted, payment of the mediator’s fees, what happens if no agreement can be reached, and the confidentiality of the parties.

When drafting the Presuit Mediation provision, its also important to consider an arbitration provision or choice of forum provision (in the event the mediation ends with an impasse), and the choice of law that will govern the contract.

D. Is it expensive to have an attorney prepare a Presuit Mediation provision for inclusion in your business contracts?

No. To draft a Presuit Mediation provision that you can include in all your business contracts, I charge a flat fee of US$275.00.

ABOUT THE AUTHOR

Fred Reilly’s law practice includes advising clients on international business transactions, corporations, contractual issues, real estate transactions, civil litigation and administrative proceedings.

Fred has been an attorney for more than 20 years. He is licensed to practice law in California, District of Columbia, Florida and as an English Solicitor. He has been admitted to practice before the United States Supreme Court and the United States Court of International Trade. Fred graduated from the London School of Economics and Political Science (LL.M. in International Business Law), Cumberland School of Law at Samford University (J.D. and Associate Editor of The Cumberland Law Review) and Purdue University (B.S. in Management). Fred spends time each month in Los Angeles and Central Florida. He is a member of The Beverly Hills Bar Association.

DISCLAIMER: This article and its content are intended to provide general information on legal topics and shall not serve as a solicitation for services in any jurisdiction where prohibited by law. This article is not, nor is it intended to be used as a substitute for legal advice. You should consult an attorney for individual advice concerning your own situation. Sending an email to the owner of this website, and receiving any response thereto, does not, in and of itself, create an attorney-client relationship.

© Copyright 2010 by Fred Reilly. All rights reserved.