Under the Florida Revised LLC Act, an operating agreement governs the following areas of an LLC:
- Relations among and between the members of the LLC and the LLC itself;
- A manager’s rights and duties;
- The LLC’s general activities and affairs; and
- Any conditions or means necessary to amend the operating agreement.
§605.0105(1), Florida Statutes.
When the operating agreement does not address a particular matter, however, the Florida Revised LLC Act (Ch. 605) governs the matter. § 605.0105(2), Florida Statutes.
Beyond the matters generally governed by the operating agreement, the operating agreement may address certain powers and impose certain restrictions upon the LLC, its members, and its managers. The operating agreement may, as to managers in a manager-managed LLC and members in a member-managed LLC, do the following:
- Specify certain exceptions to the duty of loyalty, if authorized by one or more disinterested persons after full disclosure of all material facts;
- Alter the prohibition against the LLC making a distribution in various situations to solely when the LLC’s total assets are less than the sum of its total liabilities; and
- In a member-managed LLC, the operating agreement may relieve a certain member of a specific responsibility, shift that responsibility to another member or members, and eliminate or limit a duty or obligation that would have pertained to a member.
§ 605.0105(4)(a),(b), Florida Statutes.
In addition, in certain circumstances, unless it would be manifestly unreasonable, the operating agreement may, as to managers in a manager-managed LLC and members in a member-managed LLC, do the following:
- Alter or eliminate the aspects of the duty of loyalty, duty not compete with the LLC, and duty not to act adversely to the LLC while winding down the LLC.
- Identify specific types of activities that do not violate the duty of loyalty;
- Alter the duty of care, but may not authorize willful or intentional misconduct or a knowing violation of law; and
- Alter any other fiduciary duty.
§ 605.0105(4)(c), Florida Statutes.
An operating agreement may provide for specific penalties or consequences as to a member, if the member fails to comply with the terms and conditions of the operating agreement. § 605.0105(6), Florida Statutes.
In contrast to what an operating agreement may do, as to many statutory rights that an operating agreement may not remove or modify, please see our prior blog post here.
In sum, an LLC operating agreement will govern the affairs of the LLC and may remove or modify various statutory rights and duties. The exceptions, however, are that certain rights and duties may not be modified and others may only be modified if the modification is not manifestly unreasonable. The key is, when forming an LLC, the founding members should consider carefully what modifications of the LLC code they want the operating agreement to address. This is because it may difficult to modify the operating agreement later without unanimous member consent.