Are Co-Owners of an LLC Considered Business Partners in Florida?
A limited liability company (LLC) is a type of business entity that combines some of the advantages offered by corporations (liability protection) and partnerships (pass through taxation). Technically, the owners of an LLC are referred to as “members” not “partners.” That being said, they still owe the company—and, often, each other—certain responsibilities. Here, our Miami partnership dispute attorney explains key things to know about the relationship between members of an LLC in Florida.
LLC Owners are Classified as “Members”, Not Partners
In Florida, owners of a Limited Liability Company (LLC) are officially recognized as “members,” not partners. This distinction is crucial in understanding the legal and operational dynamics of an LLC. Unlike partnerships, where partners share management responsibilities and liability, an LLC provides its members with limited liability, shielding their personal assets from business debts and obligations. That being said, there are some ways in which LLC members can feel like business partners. For example, the Florida Department of Revenue explains that the co-owners of an LLC could opt to file their taxes as a business partnership.
Members Do Owe Certain Fiduciary Duties to their LLC
Despite the distinct structure of an LLC, members are not absolved of all responsibilities towards the entity. In fact, members owe certain fiduciary duties to the LLC. As a general matter, the owners of an LLC have a responsibility to put the best interests of the company before their own personal benefit interests when they are acting as an agent of the company. In Florida, LLC members have a duty of care and the duty of loyalty to their business.
The Obligations of LLC Co-Owners are Determined Largely By the Operating Agreement
To reduce the risk of a dispute between co-owners—and other problems—every LLC in Florida should have a professionally drafted and comprehensive operating agreement in place. Broadly speaking, an operating agreement is a binding contract among the members that outlines the functional and financial decisions of the business, including governance, capital contributions, profit distribution, and dispute resolution provisions. If a dispute does arise, the matter will generally be resolved by looking to the specific terms of the operating agreement. While fiduciary duties cannot necessarily be outright waived in every case in Florida, courts give considerable discretion to LLC members to negotiate their own operating agreement.
The Takeaway: While LLC members in Florida are not considered business partners in the traditional sense, they do share certain responsibilities and obligations that are crucial for the smooth operation and legal compliance of their LLC. The operating agreement is key in detailing these roles and ensuring all members are aligned with the company’s objectives.
Speak to Our Florida LLC Member Dispute Lawyer Today
At Pike & Lustig, LLP, our Florida business litigation attorneys are committed to helping clients find solutions that actually work. If you are a member of an LLC who is locked in a dispute, we are more than ready to help. Contact our commercial law team today for a confidential consultation. Our firm represents clients in Miami, West Palm Beach, and throughout South Florida.
Source:
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