Limited Liability Company

LLC stands for Limited Liability Company. Forming an LLC is the simplest way of structuring your business to provide personal liability protection. That means your personal assets are protected if your business is sued.

When a business is structured as an LLC, it becomes its own legal entity. The LLC is responsible for its debts and lawsuits, not the owners.

The owners of an LLC are referred to as members. An LLC can have one owner (single member LLC) or multiple owners (multi-member LLC).

LLCs have much to commend them. LLCs are gaining broad acceptance among venture capitalists, private equity groups and the broader investment community. Unlike corporations, LLCs offer a flexible management structure and limited liability for owners. They also offer “pass-through taxation” — that is, they are taxed like sole proprietorships or partnerships, with income flowing directly to the members. And they offer the same limited liability protections as corporations. Perhaps most importantly, since the late 1990s, LLCs have been exempt from Florida’s corporate income tax. That exemption coupled with their flexibility has led directly to their explosive growth.

So popular are they that Florida now has more LLCs than corporations. As of October, 2014 794,291 LLCs were active in the state, versus 723,796 corporations. Since 2008, more new LLCs than corporations have formed in Florida each year. In 2013, 178,565 LLCs were formed in Florida, versus 102,305 corporations. Consequently, LLCs’ supremacy in number grows by the month.

There have been some changes made to laws in Florida, in reference to LLC's. Some of the changes in the new act were to eliminate ambiguities and to lessen litigation risk for conscientious LLCs. Among the highlights:

Lenders should also be aware of the new act changes. It is now more important for lenders to review a borrower LLC’s operating agreement. The new act allows an LLC to condition any amendments to its operating agreement on the approval of a third party, such as a lender. It also permits a person to be a member of an LLC even if that person has no right to share in any profits or distributions. Under the new act, a lender or creditor can no longer request a court to judicially dissolve an LLC. The new act also adds a method for a dissolving LLC to dispose of unknown claims, similar to what was added to Florida’s corporate laws years ago.

The new act includes many other changes that affect an LLC’s internal governance and relationships with its members. Some of the changes in the new act are designed to make sure that all LLC members and managers remain honest and transparent in their dealings with their partners and with those with whom they do business.

While the new act may seem complicated, its intent is to simplify and modernize. It was drafted as a joint effort of the Florida Bar’s Business Law Section, Tax Section and Real Property, Probate and Trust Law Section. Many provisions of the old LLC act were kept intact, but the provisions that are new or were revised are substantial. It all comes down to common sense, decency and reasonable vigilance — in short, doing the right thing.