The Florida Bar Business Law Section recently discussed and vetted proposed changes to Florida’s Limited Liability Company Statutes at its Annual Retreat. The two primary areas under consideration are the absence of specific default protocols and procedures that would apply to dissolution lawsuits and provisions allowing for the award of attorneys’ fees and costs incurred in such actions where they have been determined to have been brought in bad faith. Unlike Florida’s Corporate Code, which contains such default provisions, Florida’s Limited Liability Company Statutes presently do not.
The default protocols for LLC dissolution actions are still in the development process, but the Business Litigation Committee unanimously opposed the inclusion of any fee provision as it determined that such a provision would cause more litigation that it would resolve. Additionally, the Committee recognized that other provisions exist in Florida law to provide the necessary protections to litigants. Some other changes that will be under consideration in the near future are specific jury instructions for business litigation cases, re-writes to the non-compete statutes, and updates to Florida’s 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 enterprises over the past decade. Most business attorneys recognize that the significant deficiency in that body of law is the absence of robust default provisions. Because many owners form their LLCs directly, they often do not utilize or create an operating agreement. Unfortunately, if disputes later arise between the business owners there is a distinct absence of agreed-upon procedures and statutory guidelines to resolve those situations. This can cause an otherwise resolvable dispute to mushroom into an expensive lawsuit leading possibly to the judicial dissolution of the business and loss of all goodwill and assets.
The most appropriate method of avoiding these scenarios is to retain a competent and experienced business attorney to craft an appropriate operating agreement for the parties’ particular and unique circumstances. While generic documents can readily be found on-line, those documents may not fully apply to the special circumstances of a given business. The difference between generic documents and those crafted for a business is analogous to buying a suit off the rack versus a custom-tailored, bespoke outfit. In the final analysis and until Florida’s Limited Liability Company Statutes are revised, the best plan to follow is Ben Franklin’s famous quote of “an ounce of prevention is worth a pound of cure”.