Why You Should Form a Multi Member LLC

If you want the highest level of protection for your Florida LLC, consider forming a multi member LLC. This is because creditors of a single member LLC can reach the assets of the company by obtaining a charging order and foreclosing on its members’ interests.

A multi member LLC limits a creditor’s ability to reach a member’s interest by limiting distributions to that individual member. In addition, management rights are protected by the law against individual members’ liability for claims related to management authority.

Forming an LLC

Forming an LLC legally establishes your business, limits your personal liability and gives you tax advantages. It’s an inexpensive way to get your business up and running.

Before you can form your LLC, you need to choose a name and decide who will run the business (managers or members). You must also apply for an employer identification number from the Internal Revenue Service.

Once you have selected your LLC name and decided on a management team, the next step is to draft and file articles of organization with your state’s Secretary of State. Then, you must obtain your LLC’s nine-digit Employer Identification Number from the IRS to identify your business for taxes and annual reporting with the state.

Florida requires each LLC to have a registered agent, which is an individual or business that accepts legal papers from the state on behalf of the company. The registered agent is required to live in the state and have a physical address there.

Adding a Member

If you’re looking to add a new member to your LLC, you should make sure the process is handled correctly. Adding a new member is a major change to your company and can have significant tax consequences.

When you’re looking to add a new business partner, it is important to follow the rules outlined in your operating agreement and state law. The operating agreement will typically outline the procedure for adding a new member, including if it requires a vote by all members or by less than unanimous consent.

The Articles of Organization should also be amended to reflect the changes. This is especially true if the management structure is changing from manager-managed to member-managed or vice versa.

If you are unsure about the process of adding a member to your LLC, consider hiring a lawyer to help you out. ContractsCounsel has a marketplace where you can post your legal needs and receive bids from lawyers in the field.

Changing a Member

When a member is added to an LLC, there are several steps that must be taken. These include amending the articles of organization and adding the new member’s name to the operating agreement.

To change a member, the members must also notify the appropriate government agencies. This will vary depending on the state in which you formed your LLC, so check your states requirements and submit a form accordingly.

You’ll also need to obtain an employer identification number (EIN) for your multi-member LLC, if you haven’t already done so. You can apply for an EIN for free online, and it’ll be used for both your federal tax filings and your state tax filings.

The new member should be listed in an amendment to the operating agreement with her name, percentage of ownership, capital contribution, and percentage of losses and profits that she will be allocated. Then, the members should vote on the addition to the LLC in the way that is detailed in the operating agreement.

Handling a Member’s Death

When an owner of a single member LLC dies, it can leave their business in a state of flux. This can be a big problem in these troubled economic times, and it is something that should be addressed.

Fortunately, Florida has a different law for single-member LLCs. Under this law, a creditor can attach an interest in a single-member LLC, but only to the extent of distributions that a debtor member would receive from the company.

However, if the deceased member has a well-crafted operating agreement that demonstrates their ownership rights with rights of survivorship, this can be resolved. As a result, other members will have the full ownership rights to that member’s share.

If the deceased member did not have a will that dictates who would inherit their shares, it is determined by probate. In this case, the personal representative of the estate will determine if the shares may be inherited by heirs or should be bought off by other members retaining control of the LLC.