LLC Member Disputes in Florida: Understand Your Options Before You Act

An LLC member dispute in Florida is a disagreement between co-owners of a limited liability company over votes, money, records, control, or how a member leaves. Chapter 605 of the Florida Statutes sets default rules, but the company’s operating agreement usually answers the first questions.

This page is the responsibility of Eduardo A. Maura. It gives general information about how LLC member disputes work in Florida. Ayala Law PA focuses on business litigation, including shareholder and partnership disputes, commercial and contract disputes, construction and real estate litigation, and international trade litigation. The firm’s office is at 1646 W Snow Ave in Tampa, Florida, and it serves businesses in Hillsborough County and the Tampa Bay area from that office.

How Does an LLC Member Dispute Differ From a Corporate Shareholder Dispute?

An LLC member dispute runs mainly through the operating agreement and Chapter 605. A corporate shareholder dispute usually runs through a board of directors, officers and shareholder meetings.

Owners of an LLC are called members. They hold membership interests, not shares. The Florida Division of Corporations explains that members are the owners of the company and that an LLC can be member-managed or manager-managed (Sunbiz LLC FAQ). That choice shapes who votes and who runs daily affairs.

The LLC structure is more flexible than a corporation. Florida law lets the operating agreement govern how members relate to each other and to the company (§ 605.0105). That flexibility means the contract language often decides the claim. Read the agreement early, before anyone takes a step. The broader corporate rules are covered in our shareholder disputes practice area.

Why Does the Operating Agreement Set the First Rules?

The operating agreement sets the first rules because Florida law gives it that role. It can cover how members relate to each other and to the company, and the means for amending it.

Chapter 605 fills the gaps. Where the operating agreement does not otherwise provide for a matter described in subsection (1) of the statute, the statute governs that matter (§ 605.0105). So a missing clause does not leave members without rules.

Limits apply, too. An operating agreement cannot relieve a person from liability for bad faith, willful or intentional misconduct, or a knowing violation of law. A court decides whether a term is manifestly unreasonable, and it looks at the circumstances that existed when the term entered the agreement (§ 605.0105).

Amendments are a common source of conflict. In a member-managed LLC, the operating agreement can be amended only with the vote or consent of all members (§ 605.04073). When two versions exist, the fight often centers on which one was properly signed and when.

How Do Votes and Deadlock Work in a Florida LLC?

In a member-managed LLC, a majority-in-interest of the members generally decides an act. Each member’s vote counts in proportion to that member’s share of profits.

This rule creates trouble in a 50/50 company. Neither side holds a majority, so neither side can win a vote alone. Operations, contracts and hiring decisions can stall while the members argue.

Members can also act without a meeting. The action must be approved in a record by members holding at least the votes that a meeting would need. Members who did not consent must get notice within 10 days after the action (§ 605.04073). Skipping that notice is a common mistake.

When members cannot break a deadlock, a circuit court may order judicial dissolution. The statute requires that irreparable injury to the company be threatened or already suffered (§ 605.0702). If the operating agreement has a deadlock sale provision that was initiated before the court determines that grounds for dissolution exist, that provision can resolve the deadlock instead of a court order, so long as its provisions are then initiated and carried out under its terms or under an agreement of the members. Whether a deadlock meets these tests depends on the facts.

What Rules Apply to Distributions and Company Records?

An LLC cannot make a distribution that leaves it unable to pay its debts as they become due in the ordinary course, or that leaves its total assets below its total liabilities plus the amount needed, if the company were dissolved and wound up at the time of the distribution, to satisfy the preferential rights of members and transferees whose rights are superior to those of the persons receiving the distribution. Members also have a right to records and information about the company.

Under Florida law, the company may not make a distribution if, after the payment, it would be unable to pay its debts as they come due. It also may not pay out if its total assets would fall below its total liabilities plus amounts needed to satisfy preferred rights on dissolution (§ 605.0405). Disputes often start when one member is paid while others are not.

The company must keep certain records at its principal office or another location. These include a current list of members and managers, the operating agreement, the articles of organization, and financial statements for the three most recent years (§ 605.0410).

After a member demands information, the company must respond within 10 days. The response must say what information it will provide and when and where, or the company must state its reasons for declining (§ 605.0410).

If the company refuses inspection, the circuit court in the county of the principal office may summarily order inspection and copying at the company’s expense (§ 605.0411). The court must also order the company to pay reasonable attorney fees, unless the company shows it refused in good faith with a reasonable basis for doubt about the member’s right (§ 605.0411). Unexplained expenses and payments to related parties often sit at the center of these fights.

What Fiduciary Duties Do Members and Managers Owe?

Members of a member-managed LLC and managers of a manager-managed LLC owe duties of loyalty and care to the company and its members. These duties are the core of most breach-of-duty claims.

The duty of loyalty requires a member or manager to account to the company for any profit derived from using company property (§ 605.04091). It also covers profit from taking a company opportunity.

The duty of care requires a member or manager to avoid grossly negligent or reckless conduct, willful or intentional misconduct, and knowing violations of law (§ 605.04091). A member does not break a duty just because the conduct also helps that member.

Self-dealing is a frequent flashpoint. A transaction between the company and an insider is not void only because of the insider’s interest, if the statute’s requirements are met (§ 605.04092). Those requirements include who approved the deal and how it was disclosed. Who carries the burden of proof depends on how the approval happened.

Duty claims often come packaged with records demands and dissolution requests. Gather the facts about who benefited from a deal before deciding which claim fits.

Can a Member Be Forced Out of a Florida LLC?

A member usually leaves through the operating agreement, a negotiated buyout, or a court order. There is no simple way to remove a co-owner on your own.

Chapter 605 treats a member’s exit as “dissociation.” A person is dissociated when the company has notice of the person’s express will to withdraw, or on a later withdrawal date the person specified if that date is after the company’s notice, or when an event stated in the operating agreement occurs. Dissociation also follows an expulsion under the agreement, or the death of an individual member (§ 605.0602).

Expulsion by judicial order is also possible.

Common exit routes include a negotiated buyout, a buy-sell formula in the agreement, and a valuation process.

The steps taken before a removal can decide whether it holds up. Follow the notice, vote and valuation steps the agreement requires. Skipping them is a common reason a removal is challenged.

Does an LLC Dissolve If a Member Leaves?

A member leaving does not automatically dissolve an LLC. Florida law lists specific events that cause dissolution, and a single member’s exit is not one of them by itself.

Under Chapter 605, an LLC is dissolved when one of these events occurs. The operating agreement states an event that causes dissolution. All members consent. The company has no members for 90 consecutive days, subject to exceptions. A court enters a decree of judicial dissolution, or the state files a statement of administrative dissolution (§ 605.0701).

A court may also dissolve an LLC on specific grounds. These include deadlock in which the members are unable to break the deadlock and irreparable injury to the company is threatened or being suffered, illegal or fraudulent conduct by those in control, and misappropriation or waste of company assets that causes injury (§ 605.0702).

After dissolution, the company must wind up its affairs. It must discharge or provide for its debts and distribute its assets. It may prosecute and defend actions, and it may settle disputes by mediation or arbitration (§ 605.0709).

Can LLC Members Be Sued Personally?

Generally, a member is not personally liable for the company’s debts just because they are a member or manager. The company’s debts belong to the company.

Florida law states that a company’s debt or liability is solely the company’s. A member or manager is not personally liable for it only because of being or acting as a member or manager (§ 605.0304). A failure to observe formalities is also not, by itself, a ground for personal liability (§ 605.0304).

Courts can reach past the company in narrow cases. Florida courts pierce a corporation’s veil only on proof of improper conduct, meaning the entity was used to mislead creditors or to perpetrate a fraud on them. As the court explained in Wurtzebach v. Flooring Depot FTL, Inc., this “showing of improper conduct” requires proof that “the corporation was actually organized or used to mislead creditors or to perpetrate a fraud upon them.”

A member can also be sued by other members. A claim may arise from breach of the operating agreement or breach of a fiduciary duty under Chapter 605 (§ 605.04091).

Keep company money, contracts and signatures separate from personal ones. Mixed accounts make it harder to show which decisions belonged to the company.

What Mistakes Turn a Member Disagreement Into a Lawsuit?

The most common mistakes are missing or outdated operating agreements, unsigned amendments, informal approvals and mixed bank accounts. Each one gives the other side an argument.

Acting on a disputed decision before reviewing the agreement can weaken a member’s position. A member who takes control of a contract or account may face claims that the move was not authorized.

Write things down. Record meetings, notices and votes. A written record helps show what was approved, by whom, and on what notice.

Watch for claims that do not fit the facts. Given the existence of an express contract covering the same subject matter, “claims arising out of that contractual relationship will not support a claim for unjust enrichment.” (Williams v. Johnson, Fla. DCA 2017) The operating agreement may control the outcome.

Early review of the agreement and company records usually clarifies the options. It can also show which deadlines and notice steps apply.

What Should You Do Next in an LLC Member Dispute?

Start by gathering the operating agreement, every amendment, the company records and the written decision in question. Those documents show which rules apply and what the company has already done.

Your situation may involve a co-member who blocked a vote, a distribution that was withheld, a records request that went unanswered, or a proposed removal. Each of these raises questions under the operating agreement and Chapter 605.

Ayala Law PA focuses on business litigation, shareholder and partnership disputes, and related commercial matters for businesses in Hillsborough County and the Tampa Bay area. Fee terms are explained before any engagement, and no particular outcome can be promised.

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