If you are starting a business, it may be useful to consult an attorney about formation options and documents related to establishing different forms of entities. The most common organizational options are limited liability companies, corporations, and partnerships. Two considerations when determining the form of the business are tax consequences and liability. It is also important to keep in mind the possibility of governance disputes and litigation. Although an experienced attorney can help by making sure you have well-drafted documents from the outset, conflicts may still arise. It is important to consult an experienced litigator at the start of a dispute. At Owen & Dunivan, PLLC, our business law attorneys can offer sound advice to entities in Brandon and the surrounding cities, from the process of their creation through any litigation that may arise.The Process of Corporate Formation
For some businesses, a limited liability company (LLC), which is governed by Florida Statute Chapter 605, is a good option. As the name suggests, owners (members) in an LLC have a limited personal liability for the company's actions and debts. The limit is the members' financial investment. There are also tax benefits. To form an LLC, you will need to file articles of organization with the Division of Corporations. Each year, you will need to file an annual report and pay a renewal fee. While an operating agreement is not legally required, it is advisable to have a sound, well-drafted operating agreement when there is more than one LLC member. This agreement should cover the financial duties and roles of each member, buy/sell arrangements, and business operations.
For other businesses, a corporation may offer the best protection, but this form requires you to follow more statutory formalities than an LLC does. To form a corporation, you will need to file articles of incorporation initially and file a report every year after that. The corporation may be for-profit or nonprofit. For-profit corporations are created to distribute income to the owners of the corporation. Generally, a nonprofit is created for religious, artistic, educational, or charitable purposes, and income is not distributed to members, officers, or directors except as legally permitted. However, this does not mean that you will be barred from trying to make a profit. An attorney can carefully draft corporate bylaws to avoid or at least reduce governance conflicts down the road.Legal Representation during Litigation
No business operates flawlessly, and you may encounter governance or internal management problems. For that reason, it is important to carefully anticipate what could go wrong and include provisions in the operating agreement or bylaws to address how problems will be resolved if they arise.
A member's financial and managerial duties are usually set forth in an operating agreement. However, if there is no operating agreement, any internal disputes will be governed by Chapter 605. In some cases, it may be necessary for a member to dissociate from the LLC. One method is dissociation by expulsion under Section 605.0602. The operating agreement may prescribe a method for this, but if there is no provision in the operating agreement, the law permits other methods.
For example, members may unanimously agree to expel a particular member if the LLC cannot lawfully carry out its operations with the expelled member, the expelled member has transferred its whole transferable interest in the LLC other than for security purposes or a charging order, or the expelled member is a dissolved corporation or other entity if certain conditions are met. In cases when the law does not expressly outline a method of expulsion, but the member's actions adversely and materially affect the company or violate a fiduciary duty, it may be necessary to ask the court to order expulsion.
Owners or shareholders of a corporation owe a fiduciary duty to operate the company's affairs in its best interest and to not favor their own interests over the minority shareholders' interests. One internal management problem that may arise in a corporation is shareholder oppression. This occurs when majority owners of a corporation use their power to deny the minority owners the right to enjoy the company's financial returns or participate in control. Oppressive conduct can include diverting earnings to the majority owners by providing excessive compensation, removing minority owners from the board, using company funds to pay personal expenses, or misappropriating corporate assets for personal gain. The minority shareholders' recourse is a lawsuit for breach of fiduciary duty. Remedies may include dissolution of the corporation and money damages.Consult an Experienced Business Law Attorney in Brandon
If you are starting a business or encounter disputes during the process of running your organization, you should consult a corporate lawyer who is experienced with assisting clients in the Brandon area. Our firm also can handle transactional and litigation matters for businesses in Tampa, Riverview, and other cities in Hillsborough County and elsewhere in Florida. Contact us via our online form or call us at (813) 502-6768 to set up an appointment.