Unsigned Operating Agreements are Enforceable in Florida
Did you know in addition to collection work Andre Law Firm P.A. has a thriving civil litigation practice? While the firm is best known for collections practice, it also handles business litigation disputes and general civil matters.
An issue that recently came up with one of the firm’s valued clients involves a case where there was a dispute between the members of a limited liability company. Often such partnerships are handled somewhat informally (the dreaded “handshake” or “gentleman’s” agreement). In this case the client had an operating agreement the parties had negotiated, but they never got around to signing. The parties did business together for several years, and only years later did a conflict arise. The agreement as contemplated greatly benefited our client, but a signed copy did not exist. Does the contemplated operating agreement control when it is not signed?
Operating Agreements are not Subject to Statute of Frauds
An operating agreement in an LLC is contract, a contract that almost always is contemplated to go into perpetuity (fingers crossed right?). Contracts longer than a year are usually subject to the “Statute of Frauds,” which is codified as Fla. Stat. 725.01. It basically states that certain contracts to be enforceable must be in writing (contracts for real estate, contracts longer than one year, etc.) Contracts are also in large part, bilateral, meaning the assent of both sides is necessary to make the contract binding. That assent is usually represented by the signature of the parties to the contract.
The LLC Statute
Operating Agreements, by statute, do not have this signature requirement. The LLC statute in Florida is governed by Chapter 605 of the Florida Statutes. Section 605.0106 establishes the enforceability of an operating agreement in the state, clarifying that the operating agreement is not subject to any “statute of frauds” (other than capital contribution obligations), along with a host of other situations where the unsigned operating agreement will be deemed fully enforceable. An unsigned operating agreement could even allow for the inclusion of new members, if certain conditions in the operating agreement are met.
While the very best practice is to have your (skilled) attorney draft and have the parties sign the operating agreement prior to formation of the LLC, this bit of knowledge about the LLC saved our client a ton of money.
Do you have a business litigation dispute that needs attention? Contact Andre Law Firm today.