Corporate Law

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Do I Want an Arbitration Clause in My Florida Operating Agreement?

One question that Miami corporate lawyers get all the time is do I want an arbitration clause in my operating agreement? That is a loaded question. Any lawyer who answers with a simple “yes” or “no” is likely not taking into account your business uniqueness.

Whether or not you want to include an arbitration clause in any agreement is something that should be considered with the help of a Miami corporate attorney with experience drafting contracts, memorandums of understanding and other agreements.

It would help to first understand what arbitration is and how it works. Arbitration is a form of alternative dispute resolution that Florida business lawyers routinely suggest as a cost effective dispute resolution forum. Others, think arbitration is just another fad and like many fads, it can be costly. Whereas anyone has a right to go to Court and file a lawsuit, parties can only be brought to the arbitration table if they agree in advance to “submit to arbitration.” So the question for the small business owner in Miami is simple, “do I want to submit myself to arbitration?”

At Ainsworth + Clancy we approach each case individually to see whether or not arbitration is a good fit for your business. But how do South Florida business lawyers determine if arbitration is right for their clients?

The pros of arbitration are many. For one thing, the Parties can select who they want to act as the arbitrator, which is basically a judge. Miami corporate attorneys know that this is a great aspect of arbitration for specialized businesses. Who better to understand the telecommunication lawsuit you are in but a seasoned veteran of the telecommunications business? Second, the Parties can expect the dispute to be resolved faster (that does not mean better). Finally, arbitration relaxes rules like the Rules of Evidence which can prevent otherwise important facts from getting into the record for a Court or jury to consider.

So what do you have to lose? Arbitration also has its cons. For example, arbitration against large companies can present issues of neutrality. If you are an arbitrator that is picked by a Fortune 500 company to arbitrate an issue, how you side is going to affect whether or not they use your services in the future. Florida corporate attorneys know that clients should be wary of entering into arbitration agreements with a company that has unequal bargaining power. Also, arbitration can get expensive. Did you know that if you elect to use arbitration, you have to pay the arbitrator hundreds of dollars per hour? Many South Florida businesses do not know that an arbitration clause costs an arm and a leg until is too late! Finally, in arbitration you lose many of the due process rights afforded through the Miami-Dade Courts! For example, you will no longer have a right to a jury and you lose many of the grounds for appeal of an adverse finding by the arbitrator.

Do you know whether or not you want to enter into an arbitration agreement for your next business venture? Consider speaking to experienced corporate attorneys before you sign an agreement with an arbitration clause.

Benefits of Incorporation

Small business does not mean small profits or small risks, but more and more in Miami we find that small businesses retain limited help from business professionals. In fact, some entrepreneurs actually run their own business without incorporating an entity, either LLC or corporation. Some entrepreneurs think that having a dba (doing business as name) shields them from liability… but it does not.

If you own and operate a sole proprietorship or partnership in Southern Florida have you ever considered changing to a limited liability company (LLC) or incorporating? The benefits are numerous.

For one thing you may be able to use limited liability companies and other business entities to protect yourself from liability but what does that mean? Liabilities can come from all angles. Employees, customers, independent contractors and vendors are all possible sources of discord, disagreement and lawsuits. Southern Florida corporate attorneys know how to use the laws of Florida to protect you from the common liabilities of your industry.

You may also be able to save money on taxes using these structures.

Failure to insulate your liability can be costly. For one thing a judgment against you individually could result in liens and garnishment of bank accounts. Do you really want to rely on creditor laws the rest of your life when you could just rely on your entity status? The funny thing is few people realize how inexpensive proper business formation can be.  Talk to an experienced Miami corporate attorney to get a flat rate quote, the numbers may surprise you.

Florida limited liability companies really are an amazing alternative to the formalities of a typical corporate formation. Do you understand the differences between a corporation and LLC?

In a corporation, shareholders vote to choose directors. Directors then manage a corporation by choosing officers to do the day-to-day work. Presidents, CEOs, COOs are common examples of officers in a Florida corporation. In a Florida corporation the directors and shareholders both have to have annual meetings and in some cases special meetings may be required. Failure to follow these formalities could result in a corporation’s entity status being disregarded by the Courts.  The good news is that you can form an LLC.

An LLC has a lot of the benefits of a corporation such as limitation on liability and flexibility in taxation. Instead of electing directors who choose officers an LLC is owned by members. Members have a choice in how they want to manage an LLC. The default choice in Florida is member managed, meaning the members control the day-to-day operations of the LLC. Preferably though, Members can elect a manager to take care of these issues and be more removed from the day to day business. So an LLC can look like a corporation or sole proprietorship / partnership – its up to the members.

In the modern business landscape the truth is a small business can incorporate or form an LLC with relative ease. The payoff is huge as well. Talk to an experienced Miami corporate attorney to find out how much you can save in the long run.