Florida Annual Report for LLC’s, Corporations and Partnerships due by May 1

Many of you have corporations and limited liability companies domiciled in Florida and other states. As you know, to keep those companies active, it is necessary in most states to file some variety of an annual report or franchise report. You will likely receive emails or mail to your principal address listed in the state records, but often it looks like junk mail that can be ignored, or is sometimes set aside and just simply forgotten. There are also companies that send very official looking letters offering to update your records for a fee. These updates are advertisements and may or may not include filing your state annual report. You can tell if they are advertisements by looking carefully at the fine print.

For those of you doing business in Florida, the Florida Department of State, Division of Corporations requires each organized business doing business in the state, whether a corporation, limited liability company, or partnership, whether domiciled or just licensed to do business in the state, to file an annual report between January 1st and May 1st of each year in order to maintain an active status in Florida. The annual report is used to confirm or update the Florida Department of State, Division of Corporation’s records, including information related to the managers, members, officers and directors, the registered agent or registered office, the principal address or mailing address, and the federal employer identification number. For other states, similar reports and fees will also be required. The timing varies and it is important to check the dates so that you do not miss important deadlines.

If the annual report is timely filed between January 1st and May 1st, the reporting fee is as follows: $150 for a profit corporation; $61.25 for a not for profit corporation; $138.75 for a limited liability company; and $500 for a limited partnership or limited liability limited partnership. A $400 late fee will be assessed for any report filed after May 1st for profit corporations, limited liability companies, limited partnerships and limited liability limited partnerships. Failure to file an annual report by the third (3rd) Friday of September will result in the administrative dissolution or revocation of the business entity on the records of the Florida Department of State.

In addition, the Florida LLC Act has been revised and restated in whole. Effective January 1, 2014, any new limited liability company formed will need to be formed pursuant to the new Act. Any existing entity will need to amend its operating agreement and articles to reflect the new Act no later than December 31, 2015. With that in mind, we are recommending to clients that the amendments be done now and that the Annual Report filing be made reflecting the new Act requirements, specifically, the elimination of the concept of Managing Member. We also recommend filing a Statement of authority recognizing those in your company authorized to act on behalf of the LLC. This may avoid the need to file additional amendments during the year.

We are ready and able to assist you in amending your operating agreements and answering questions regarding the new Act. We are also available to assist you in properly filing your annual report in Florida and assisting you with other states.

The annual for Florida report can be submitted electronically on Sunbiz.org. Annual reports filed using credit card, debit card or Sunbiz E-file Accounts through the E-Filing tab on Sunbiz.org are processed immediately and should be posted on Sunbiz.org within twenty-four (24) hours. Check and money order payments must be submitted by mail and are processed within twenty-one (21) days, so e-filing is the preferred method of filing. For Delaware companies, the annual reported can also be submitted by following this LINK.

The e-filing process is very simple and can be completed in minutes. An Overview and Step-by-step instructions for completing the annual report can be found HERE.

If you have any questions or concerns, please let us know and we would be happy to assist you with completing the annual report.

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Sweat Equity v. Money Investors: Who Makes the Rules? [The Golden Rule of Business]

Many years ago, while working as the General Counsel to a large public company going through a Chapter 11 Bankruptcy, I learned that the Golden Rule as we all learned it in kindergarten [do unto others as you would have other do unto you] is not the only Golden Rule when it comes to business. I certainly support and believe in the Golden Rule we learned in kindergarten and try my best to adhere to it, but when it comes to money and business, I have learned that the Golden Rule really is: the person with the gold makes the rules.

In business large and small, there is often reward and equity for those who have a great idea or are the work horses driving success (the “Sweat Equity Owner”). Typically, however, the greatest percentage of equity and, hence, the greatest return in pure dollars, goes to the person who put up the money in the first place (the “Cash Equity Owner”). Once the business gets going, this often leads to resentment of the Sweat Equity Owner and frustration of the Cash Equity Owner.

Not surprisingly, the Sweat Equity Owner often feels like he has worked harder and should be compensated for the hard work and ideas. In addition, the family of the Sweat Equity Owner has started to feel the pain of long hours and missed meals and events, resenting the Cash Equity Owner whose life and lifestyle has not changed at all.

The Cash Equity Owner is frustrated because the project is taking longer than expected to show a return and the Sweat Equity Owner continues to ask for cash, primarily to meet living expenses in the form of  salaries for business personnel. The Cash Equity Owner usually has other investments or businesses and more business experience and wants the Sweat Equity Owner to work differently and take his advice on how to get the work done more quickly so that product can get to market faster. His family (or fund investors) wants to know when they will see a return on investment.

Not to sound like a broken record on the reasons for Business Divorce, but there are some things that can be done at the onset of a relationship to avoid these dilemmas. Too often, when the relationship is formed, there is no substantive discussion of duties, timing for deliverables and exit strategy for the Cash Equity Owner. The conversations are very high level and never transcribed into a detailed agreement. One party calls cash loans while the other considers it equity.

In the last 12 months, I have encountered among other missteps: companies in which the equity was never issued despite cash being infused; standard Bylaws from companies like Legal Zoom were used, but no one ever read or understood what they meant; Articles were filed on www.Sunbiz.org indicating the names of managers, managing members, officers, owners … who were not in fact in the positions indicated and who had no authority to act on behalf of the business; domain names and other intellectual property placed in the name of one owner instead of the business …. This list is hardly exhaustive, but all have led to expensive legal battles between business partners on break-up.

When I get the call, whether as an attorney or mediator, that business partners are seeking to terminate their business relationship, the first step in my analysis is to look at the agreements between the partners.  These documents become the guide on how to proceed. If they have been carefully crafted and reflect the partners intent, often the cost to the business as well as the individuals for navigating the business divorce is emotionally and financially insignificant —- Owners typically know what to expect and time is spent implementing already agreed plans. Without these written agreements or mutual acknowledgment of intent of unwritten agreements by the Owners, the cost in the first days of efforts to separate can be thousands, and at times, tens of thousands, of dollars.

At this point you are probably thinking that I am exaggerating, but in fact, if a lawsuit needs to be filed  in order to keep the business running and make it clear who has authority to act, the effort is significant and lawyer time and cost is high. We start by preparing a complaint seeking injunctive relief and serve it with requests for admissions, production of documents and interrogatories. At times, we demand a receiver be appointed if we are representing the Cash Equity Owner and our client is not ready or able to step in and run the business. We seek emergency hearings to ensure if our client in good faith believes irreparable harm to, or waste of, business assets will occur if action is not immediate.  We often need to include third parties such as the domain hosts or banks to require them to turn over account codes and keys or to freeze assets.

Courts do not like to get involved in daily business activities and if the situation  lacks clarity, the court may appoint a receiver on its own. Domains and intellectual property will need to be be place in escrow; bank accounts will need to be frozen or unfrozen; payroll companies, customers, vendors, employees will all need to be notified as to who has authority to direct activities just to keep the business operating  and attorneys will be stepping into conversations with domain hosts, bankers, customers, vendors and employees…. all while on the clock. By the way, the Receiver will hire an attorney as well and both the receiver and attorney will also be on the clock.

Back to the Golden Rule — needless to say, the Cash Equity Owner often has the gold necessary to stay afloat while the Sweat Equity Owner does not.

Although good friends and family members make great investors because they are trustworthy, life changes and needs change over time. By having a frank conversation up-front and documenting the deal, before money is invested, much of the financial and emotional cost can be minimized on business divorce and friendships and family relations can remain favorably intact. Like a good pre-nuptial, shareholder agreements, operating agreements, and buy-sell agreements, can minimize cost in the future and avoid undue emotional harm. To me, it is well worth spending a couple hours in frank discussion and a couple thousand dollars up-front when investing in a business to avoid a later fight at ten times that expense.

At the Walk Law Firm, we regularly advise clients on these matters and encourage open discussion between owners. We can work as company counsel or as counsel to a business owner in helping businesses sort through these issues.

Credibility Education for Tampa’s Small Businesses

Summary: Tampa Bay based company creates partnership with national and local businesses to provide credit and business growth strategies for qualified small businesses.

Tampa, FL – October 1, 2013 – Nationally recognized consumer and small business finance advocate, S.E. Day will host the For Small Business Only, LLC (FSBO) Business Education seminar.  Utilizing strategic alignments with corporate creditors and vendors, the FSBO seminar will provide qualified small businesses with credit building tools that assist in establishing their business credit profiles through credit reporting bureaus including Dun & Bradstreet’s PAYDEX® score.  The seminar is a one day event and will be held on October 22, 2013 at the Steinbrenner Pavilion (across from the Bucs stadium).

“The #1 challenge faced by every small business is successfully establishing business credit without using the owner’s personal credit,” states S.E. Day, founder of FSBO and host of The Legally Steal Show hosted by S.E. Day™.  “At FSBO, we work from the top down through innovation and strategy. We have aligned with major U.S. corporate creditors to provide credit tools and accounts that assist small businesses in building business credit and establishing their PAYDEX® Score.  We are also partnering with local small business owners and thought leaders like attorney Rochelle Walk to provide education and strategies to assist the participant in growing their businesses from sustainability to profitability.”

“Our firm represents and works with many small businesses and we strongly believe that success of small business is fundamental to the success of our economy ,” states Rochelle Walk, President and Owner of Walk Law Firm, PA.  “The FSBO Event will be an opportunity to provide the participants with education  regarding legal concerns and legal planning aspects of being properly prepared to grow their businesses to the next level.”

For further information and registration about the For Small Business Only Business Education seminar, please visit the website at www.ForSmallBusinessOnly.com or call 813-379-7248.  To determine if a business qualifies for credit products through FSBO, please email Info@ForSmallBusinessOnly; or, visit LinkedIn, click on groups, and join the For Small Business Only group today and get registered.

About For Small Business Only (FSBO)
FSBO is a Florida-based company providing qualified small business owners with practical knowledge and applications specifically designed to enhance their business presence and increase their bottom line.

To qualify for credit products and trade accounts, participants with For Small Business Only, LLC must meet the following requirements: be in business for a period of one to two years; possess a current, legal business structure with their state’s Secretary of State; possess a complete business address and business telephone number (no P.O. Boxes allowed, home office addresses are acceptable); and, have an IRS issued tax ID number.

Contact

S.E. Day
The Legally Steal Show
813-379-7248 ph
FSBO@legallysteal.com
www.ForSmallBusinessOnly.com

Florida Legislature Passes New Revised Limited Liability Company Act – Important Reading for Members and Managers of LLCs

Intro

On May 3, 2013, the Florida House of Representatives unanimously passed the new Florida Revised Limited Liability Company Act (the “New Florida LLC Act”).  The Florida Senate unanimously passed a companion bill a week earlier.  Governor Scott approved the bill without issue or opposition on June 14, 2013.  Since LLCs are the most common form of business in Florida, this article is important reading for all business owners, especially owners seeking to protect their LLC assets and personal assets as soon as 2014. The New LLC Act will be codified as Chapter 605 of the Florida Statutes and will govern limited liability companies (“LLCs”) within the state of Florida.  The New Florida LLC Act is materially different, in both form and substance, than the Existing Florida Revised Limited Liability Company Act (the “Existing Florida LLC Act”), which is codified in Chapter 608 of the Florida Statutes.  If you or your company is an existing Member or Manager of a Florida LLC, or if you plan to become one in the near future, it is extremely important to understand the New Florida LLC Act and how it may impact your existing and future operating agreements and other governance documents.   The summary below is not a comprehensive review of the new LLC Act and is not intended to replace the advice of an attorney, but rather is designed to help you assess your own LLCs and potential need to take action.

When will the New Florida LLC Act become effective?

 The New Florida LLC Act becomes effective on January 1, 2014 for all LLCs formed in Florida on or after January 1, 2014.  For all LLCs in existence prior to January 1, 2014, the New Florida LLC Act will not become effective until January 1, 2015; however, the members of an LLC may elect to have the New Florida LLC Act become effective as early as January 1, 2014. To do so, the governing documents of the LLC will need to be amended.

How will the New Florida LLC Act impact my LLC?

 The New Florida LLC Act, like the Existing Florida LLC Act, and like most business organization statutes, is a default statute, which means that it provides a set of standard rules governing LLCs and how they are organized, how they operate, and how they are governed.  These standard rules may be modified, with limited exceptions, through specific language contained in either the Articles of Organization or the LLC’s operating or management agreement.  Like all LLC statutes, the New Florida LLC Act specifically prohibits the LLC from including language that modifies or supersedes certain statutory provisions (these are often referred to as “non-waivable provisions”).  This is significant because the New Florida LLC Act expanded the number of provisions which are now,  non-waivable and may not be altered by agreement of the members.

What changes were made in the New Florida LLC Act?

Expanded Non-Waivable Provisions.  The New Florida LLC Act has clarified that an LLC’s operating agreement may not remove certain rights, obligations and authority granted by the Act. Some of the provisions which an operating agreement may not change include:

  1.  The ability of the LLC to sue and be sued in its own name
  2. The right of a member to maintain a direct cause of action against the LLC, another member, or a manager in order to enforce such member’s rights and otherwise protect such member’s interest
  3. The right of a member to maintain a derivative action
  4. The right of an LLC to refuse to relieve persons, including members and managers, from liability if such persons acted in bad faith or committed willful, or intentional misconduct or a knowing violation of the law
  5. A Member’s or Manager’s duty of care, duty of loyalty, or obligation of good faith and fair dealing The  power of a member to dissociate from the LLC
  6. Statutory requirements with respect to the  contents of a plan of merger, plan of interest exchange, plan of conversion, or plan of domestication, plan of dissolution, articles of organization, statutory agents and other similar provisions
  7. The applicable governing law of the Florida LLC

Managing Member Eliminated.  Under the Existing LLC Act, there are three potential management options:  (1) Member managed, (2) Manager managed, and (3) Managing Member managed.  The New Florida LLC Act has effectively eliminated the concept of Managing Member managed.  It is possible that your operating agreement may need to be amended in order to avoid confusion, unintended results, and unintended personal liabilities, and to make very clear which of the remaining options you intend to use for your LLC.  For example:  once the New Florida LLC Act becomes effective, for those LLCs that are Managing Member managed, the Managing Member may no longer be able to act alone and may require all authorized actions to be subject to a member vote in accordance with the operating agreement.  In order to avoid an unintended result, you should revise your operating agreement and governance documents to reflect the intent of the members.

New Statement of Authority.

The New Florida LLC Act allows an LLC to file a statement of authority with the Florida Department of State as a way of providing constructive notice to third parties regarding persons authorized to act on behalf of the LLC.  The Statement of Authority will be effective for five years from the last amended or filed Statement of Authority, unless terminated earlier in accordance with the New Florida LLC Act.  You should consult with an attorney to determine the implication of filing a Statement of Authority and whether such Statement of Authority would be beneficial for your LLC.

Other Changes.

  •  Non-US entities are now permitted to domesticate as a Florida LLC
  • Non-economic members (members that don’t or are not obligated to contribute) are now permitted
  • The new Act includes specific service of process rules for LLCs

What should I do with my existing operating agreement?  Moving forward, how will my operating agreements be different?

If you or your company are a member or manager of an existing LLC, or are planning to enter into a new LLC, you need to understand the New Florida LLC Act and all the changes that were recently made.  At minimum, you should review your operating agreement with a qualified business attorney. LLC Agreements need to reflect how the members desire to operate the business. An experienced and practical business attorney will help you navigate the new Florida LLC Act in a way to help you amend your operating agreement to be consistent with your intent and operations.

The Walk Law Firm is available to review your operating agreement and help you understand the impact the New Florida LLC Act will have on your Florida entity. Operating reviews can be handled on a Flat Fee or Fixed Fee basis.   As experienced Florida business and commercial law attorneys, we have studied the New Florida LLC Act and can work with you to revise, amend, restate and draft new provisions for your LLC management and operating agreements eliminating unintended confusion or results.

 

Five Questions to Ask When Hiring a Lawyer for Your Business

As a General Counsel, I spent a significant amount of time researching and interviewing attorneys and other professionals to represent my company’s interest in litigation and business negotiations. The selection of counsel is a significant investment for a business and is more than a cost. As a matter of fact, selecting the wrong counsel or failing to engage counsel may be the most costly decision a business may ever make.

Business lawyers are not a dime a dozen and all lawyers are not created equally. Experience in business and with specific transactions helps clients set strategy and successfully navigate the most difficult transactions from financing arrangements to large acquisitions of property and negotiations with key employees and contractors. Often, business lawyers are sounding boards to business owners contemplating  confidential business transactions.

With the advent of the internet, it is easy to find lawyers and there are plenty of bidding sites like Elance.com and Guru.com where you can get a flat fee or a cheap quote. As tempting as it is to hire the cheapest lawyer, I strongly suggest that business owners take the time to find the best lawyer for the situation, avoiding what might be a costly mistake. So here are 5* questions I always ask when I engage counsel for business matters:

1. Who at the law firm will handle my work?

  • If it is a team, who will be on the team?
  • Who will be the lead and my contact?
  • How was the team selected?

2. What is [each working attorney’s ] experience in handling matters like the one that I have described?

  • Has this attorney ever handled this type of matter before?
  • Has the lead attorney ever been the lead in a matter like this before?

3. What is the attorney’s and firm’s workload and ability to handle the work in my time-frame?

  • Any time off or vacations planned?
  • Is the lead attorney accessible?
  • How will communications work? Email or Telephone? In Person Meetings?
  • How often should I expect to receive a status report?

4. What does the attorney anticipate the process to be?

  • What outcomes might I expect or should I consider?
  • What are the issues are concerning?
  • Make sure you understand the terms the lawyer uses and do not be afraid to stop a lawyer and ask what something means!

5. Billing and Fees:

  • How does the firm/attorney charge?
  • Can the firm provide a detailed invoice no less often than monthly for my review?
  • How can the firm and I positively or negatively impact fees?

As you can see, fees and costs are last, but not forgotten. It is important to understand that an inexperienced attorney can consume excessive time researching a matter just like a disorganized client can consume excessive amounts of attorney time just to get information gathered — both situations can significantly increase legal cost.

I have found that for some matters, an hour of a very experienced, albeit pricey, lawyer’s time is often more valuable than ten hours of the time of an attorney who is a newcomer to the topic. When I expect the transaction or litigation to have big rewards or expose my company to significant risk, I choose experience over hourly rate every time.

*By way of disclaimer, I usually ask more than 5 questions, I always do plenty of research,  and I also ask business friends and other professionals I trust for referrals to appropriate business lawyers. My five questions are in addition to references and research.

 

 

When is the Best Time to Call Your Business Lawyer — Before You Make a Costly Mistake

In this day and age of lean budgets and concerns about return on investment, I find that many clients tend to shy away from calling legal counsel until the issue at hand has escalated to an uncontrollable level. I actually understand that, because, like my clients, I am a small business owner, with a limited budget and limited resources. I find myself watching every dollar and carefully assessing the return on my investment before clicking on my PayPal or writing a check for clicks and views, plaques and, most recently, the expense of being listed as a Top-Rate Lawyer in Tampa.  I even assess the return on legal research systems and online databases.

So how does spending to be listed as a Top-Rated Lawyer in Tampa compare with spending money on lawyers you may ask? It all comes down to return on investment. I am asked to sponsor groups, which I often do. I am asked to speak and mentor, which I gladly do, primarily for free. Lexis, WestLaw, bar associations and mediator organizations have pay-to-use and pay-to-list publications and systems.  The return on investment is fairly easy to see since my business comes to me by referrals and word of mouth, a little from the internet and mostly from reputation. I also spend some money with marketing firms, accountants, insurance, training and education and other counseling-like resources to gain guidance and to make sure that I am staying on top of  my game. The mostly costly decision I make each day about my business is the one which costs me a client or causes me to have liability for failure to deliver top quality legal services.

So how does that equate to the best time to call a business lawyer? It is before you make a decision that could cost you a sale or client or would create an undue liability for failure to deliver, breach of contract or violations of laws. For my clients, that means thinking about protecting intellectual property, providing standard or customized contracts that customers and suppliers are willing to sign, but still protect business interests, having important agreements drafted or reviewed and compliance with the laws, especially as it relates to employees and the environment so that the business is not shut down. At the Walk Law Firm, we help clients develop strategies for financing and introduce them to concepts and ideas that may be less familiar but ultimately are needed to successfully run a business. Our goal is to provide the legal counsel clients need while making sure they receive a good return on investment.

In the last few weeks, we have helped clients mediate and settle a wrongful discharge claim, resolve preference actions, navigate loan modifications  and handle a variety of after-the-fact situations that might have been avoided if we had a short conversation before a decision was made. This month, I have also found financing for a client who did thought Bankruptcy was the only option because we talked early and developed a strategic plan. After the fact, the legal fees plus the cost of settlement are often far greater than what one might anticipate in an early resolution or for a short conversation to set strategy.

For me, the best time to to call a business lawyer, is when you need to make tough decisions or when you are considering future growth and divestment strategies.  Consider a small retainer relationship with your lawyers and ask to have it cover periodic phone calls and questions. We do it for our clients so that clients can call whenever they need a little bit of legal counsel or advice before making a decision which could lead to a costly mistake.

To learn more, please visit our website at WWW. WalkLawFirm.com