Florida Revised Limited Liability Company Act: The Power to Bind the LLC

by Buchanan Ingersoll & Rooney PC
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The new Florida Revised Limited Liability Company Act (the “New Act”) became effective on January 1, 2014 for all limited liability companies (“LLCs”) formed in the State of Florida on or after January 1, 2014. The New Act applies to all LLCs, regardless of when formed, beginning January 1, 2015 and the existing Florida Limited Liability Company Act (the “Existing Act”) will be repealed on that date. The New Act modifies certain provisions relating to the authority of members and managers to bind the LLC with respect to third parties.

Consistent with the Existing Act, the New Act provides four ways a person can bind an LLC: (1) the person is an agent of the company, (2) the person has the authority to do so pursuant to the articles of organization or operating agreement of the LLC; (3) the person has the authority to do so pursuant to a filed statement of authority; and (4) the person has the status of an agent of the LLC or the authority or power to bind the LLC under another law.

Unless otherwise provided in the articles of organization or the operating agreement, all members of a member-managed LLC are agents of the LLC and, thus, each member has the power to act for and bind the LLC. All managers of a manager-managed LLC are similarly agents of the LLC.

Any person, whether a member, manager, officer, employee or otherwise, may be granted authority to act for the LLC if the LLC files a statement of authority (“Statement”) with the Department of State (the “Department”). A filed Statement provides record notice to third parties of a person’s power to bind the LLC or limitations on a person’s power to so bind.

Statements are divided into two parts: (1) those Statements related to real property, and (2) those Statements related to everything else. A Statement to execute an instrument transferring real property in the name of the LLC requires a second filing of a certified Statement in the county in which the real property is located to provide constructive notice to third parties. All other Statements require only the initial filing with the Department which is conclusive in favor of a person who gives value and relies on the grant of authority included in the Statement. Unlike Statements filed in the real property recording offices, Statements filed with the Department do not provide constructive notice to third parties.

Statements may be amended or cancelled at any time by a filing to that effect with the Department. An effective Statement is cancelled by operation of law five years after the date on which the Statement, or its most recent amendment, becomes effective.

The New Act continues to provide a shield for members and managers against the debts, obligations, and liabilities of the LLC but does not provide any protection against such person’s own conduct or a contractual obligation expressly assumed by such person. In addition, the equitable doctrine of “piercing the corporate veil” presumably continues to apply under the New Act. The New Act, however, expressly provides that the failure to observe formalities in the activities and affairs of the LLC will not itself be a basis for imposing liability on members and managers of the LLC.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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