Florida’s Revised LLC Act Says “Goodbye” to Managing Members

Under the Florida Revised LLC Act (“Revised Act”), which became effective on January 1, 2015, the concept of “managing members” is now obsolete. See Fla. Stat. §§ 605.0407 to 605.04074. So why does it matter?

If an LLC’s operating agreement or articles of organization does not currently refer to the LLC as “manager-managed,” the LLC will be now deemed to be managed by all of its members collectively. Fla. Stat. §§ 605.0407(1)(a) and (1)(b). This means that, absent clarification in the operating agreement, the LLC’s former managing member may be divested of sole authority as manager and, instead, now be required to share that authority with all other members based upon their respective ownership interest. Fla. Stat. § 605.0407(2).

Here’s an example of how this statutory change can have big implications. If an LLC previously had a single managing member, but a total of five members, each with 20% ownership interest, on January 1, 2015, the five members would have defaulted into five co-equal member-managers. This would mean that any one of the member-managers could then bind that LLC to a contract, hire or fire employees, or appoint a new board of managers. Depending on the circumstances, this could be a material issue to the LLC’s business.

To avoid these types of unexpected and unintended consequences from the Revised Act, the LLC should be diligent to have counsel review and update the LLC’s operating agreement. In the update, the LLC needs to expressly appoint as “managers” whomever the members prefer to have management authority over the LLC.

In addition, once a new manager is appointed, the Revised Act allows the manager to delegate his or her management rights and powers to others. See Fla. Stat. § 605.04071. If a manager delegates his or her rights or powers, however, the manager still preserves his or her status as a manager.

In sum, all LLC’s with operating agreements that pre-date January 1, 2015 should be reviewed to ensure they are in conformity with the Revised Act.  An operating agreement’s reference to a “managing member” is now obsolete.