When compared to other types of business structures, limited liability companies (LLCs) often have greater flexibility in terms of administration, management, and general business formalities.
Nonetheless, transferring or removing ownership of a share of interest in an LLC may be a surprisingly difficult task. In this article, you will discover how to remove an owner of an LLC in Florida.
How Do I Remove an Owner of an LLC in Florida? – The Basics
Generally, other business entities vest ownership in shares of interest (e.g., stocks), which shareholders may buy or sell accordingly. However, the ownership of a limited liability company (LLC) is vested directly in its owners (referred to as “members”).
Primarily, the first step to remove an owner from a Florida LLC is reviewing the business’s operating agreement. The operating agreement is a legal document that contains detailed instructions and provisions by which the company must operate.
Therefore, an LLC’s operating agreement must encompass everything from the company’s daily operations to the necessary procedures to transfer or remove ownership from a member.
Although not required by Florida statutory rules, an operating agreement is crucial to ensure professionalism and prevent potential issues, such as finding alternative methods to remove a member when necessary.
How Do I Remove an Owner of an LLC in Florida? – Buyout Provision
When drafting an operating agreement for a Florida LLC, the members involved usually include a buyout provision. As its name suggests, a buyout provision provides detailed instruction for how and when the members of an LLC can buy or sell their ownership interest.
Depending on how the operating agreement was structured, it is possible to include triggering events that would require another member to purchase the ownership interest of each other, such as death, divorce, bankruptcy, or optional departure from the business.
In most cases, upon the departure of one or multiple members, the remaining members would split the interest of the departing parties among themselves and continue to operate the LLC with a reduced number of owners.
In Florida, many LLCs include a buyout provision in a contract separate from the operating agreement, which is the buy-and-sell agreement.
Ultimately, if an LLC has no operating agreement, it is still possible to work with an expert attorney to write a document stating that all members expressly agree to a buyout transaction and approve the withdrawal of one or multiple departing members.
How Do I Remove an Owner of an LLC in Florida? – Dissolution and Reformation
Another way to remove an owner of a Florida LLC is dissolving the company altogether and reforming it from the very beginning. Although this solution may not be a seamless choice, it might offer a way out in cases when a buyout provision is not available or feasible.
Typically, dissolving and reforming an LLC is applicable when several of the members involved in an LLC want to give up their ownership interests simultaneously. Once the company is dissolved, the remaining members who want to reform it may continue with the business under a new entity, while others may walk away after receiving their fair share.