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The LLC may make distributions to its members in accordance with its Operating Agreement
except that no distribution may be made that would render the LLC insolvent. Distributions are
generally made on an equal basis to each member based on each member’s capital
contribution to the extent that such contributions have been received by the LLC. Therefore, if
the LLC wishes to make distributions in a manner other than pro rata based on each member’s
capital contributions, it should address such intentions in its Operating Agreement.

3.2.8 Recordkeeping and State Reports

LLCs are required to file an annual report each year with the Department of State by May 1 of
the subsequent year. This annual report is filed on a prescribed form, and must contain the
following information: (1) the name and address of the LLC; (2) the names and addresses of
the managers or the managing members of the LLC; and (3) the name of the Florida registered
agent. No financial information is required to be filed with the Department of State. The current
annual filing fee for timely filed reports is $138.75, and there is a $400 penalty for the late filing
of reports. Annual reports can be filed electronically at http://www.sunbiz.org.

For more information on filing annual reports in Florida, see Chapter 2 of this Guide [General
Regulation of Business in Florida].

3.2.9 Taxation of LLCs
As discussed above, unless an LLC elects to be treated as a corporation for federal and state
tax purposes, it is generally not subject to entity-level taxation of its income under the federal
tax laws. However, LLCs are still required to file informational tax returns. Unless a member is
exempt from federal income taxation, its distributive share of membership income and loss is
treated as income or loss to the member and reported on his, her or its individual return,
regardless of whether a distribution of the income reported was ever made. Taxation of this
annual income will increase the member’s basis in his, her or its share of the LLC, and when a
distribution is eventually made, it will not be taxed again on the receipt of the cash to the extent
that the member still has basis in the member’s share of the LLC. There are many tax
implications to forming an LLC and business owners should consult an accountant or tax
attorney before proceeding with formation to fully understand how their tax liabilities and
reporting obligations may be impacted.

For more information on taxation of business entities, see Chapter 5 of this Guide [Taxation].
3.3 Florida Partnerships

3.3.1 Introduction
General partnerships, limited partnerships, limited liability partnerships, and limited liability limited
partnerships are several forms of unincorporated organization that Florida recognizes as
statutory entities under the laws of the State of Florida. Partnerships generally provide an
extremely flexible framework for government and management of a business operation. Profits
and losses in a partnership are allocated according to the terms of the Partnership Agreement,
but importantly, unlike LLCs, all of the assets of each partner in a general partnership are at risk
and may be made available to satisfy the obligations of the partnership, rather than just the
capital contributed to the entity.

To reduce potential liability exposure, limited partnerships (“LPs”) were created and permit the
creation of a special class of partners known as “limited” partners. Limited partners provide

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