Your Co-Founder Wants Out and You Never Signed an Operating Agreement. Now what? | Braslow Legal
The conversation usually starts the same way. One founder is done, the other is blindsided, and nobody can find a signed document saying what happens next. At Braslow Legal, that call comes in more often from profitable companies than failing ones, because there is finally something worth fighting over. You are not in a vacuum, though. Florida wrote a default agreement for you the day you filed your articles of organization, and you almost certainly would not have agreed to its terms.
What rules apply to a Florida LLC with no operating agreement?
Chapter 605 of the Florida Statutes, the Revised Limited Liability Company Act, supplies every term you left blank. An operating agreement is simply the contract among members that sets management rights, ownership splits, and exit terms. Without one, the statute governs.
Two defaults surprise people the most. Under section 605.04073, a member-managed LLC gives each member equal rights in management, and ordinary business decisions are made by a majority of the members counted by head, not by ownership percentage. Under section 605.0404, distributions before dissolution are shared in equal shares among members, regardless of who contributed the capital. If you put in $200,000 and your co-founder put in a laptop, the statute still splits the distribution down the middle.
Can a co-founder just quit, and do we have to buy them out?
They can leave whenever they want. You are generally not required to buy them out.
Section 605.0601 gives any member the power to dissociate at any time by express will, rightfully or wrongfully. Once they do, section 605.0603 terminates their right to participate in management and converts their stake into a transferee interest. They lose the vote and keep the economics. There is no statutory right to be cashed out.
That cuts both ways. A departing founder keeps a permanent passive stake in a company they no longer build, and whoever stays shares profits forever with someone who left. If the departure breaches an agreement you did have, section 605.0602 treats it as wrongful dissociation and the company can pursue damages.
We talked about the terms but never signed anything. Does that count?
Often, yes. Florida defines an operating agreement to include oral and implied agreements, not just written ones.
The definition in section 605.0102 covers an agreement whether oral, implied, in a record, or some combination. Courts look at what the members actually did. Emails confirming a 60/40 split, a cap table in an investor deck, K-1s issued year after year with consistent percentages, capital account entries in QuickBooks, and texts about who handles what all become evidence. Build that file before anyone starts deleting threads. It is often the difference between the statutory equal split and the deal you actually made.
What happens if neither side will move?
Your practical options are a negotiated buyout, mediation, or a petition for judicial dissolution under Chapter 605.
Judicial dissolution asks a court to wind up the company when it is no longer reasonably practicable to carry on the business, or when those in control have acted in a manner that is oppressive and directly harmful to the petitioning member. Section 605.0706 then gives the company or the other members the right to elect to purchase the petitioner's interest at fair value instead of dissolving, generally within 90 days after the petition is filed. If the parties cannot agree on price, the court determines fair value.
Contested business divorce litigation commonly runs a year or more and requires a formal valuation, so most resolve in a negotiated buyout once both sides see the fees and the discovery calendar.
Who owns the logo, the code, and the client list they built?
Not automatically the company. Copyright vests in the author, and only work by employees within the scope of employment qualifies as work made for hire under 17 U.S.C. 101.
If your co-founder built the site as a member rather than a W-2 employee, or a contractor did it with no written assignment, the company holds a license at best. Handle this inside the separation agreement, along with trademark ownership and domain and account credentials.
How Braslow Legal handles a co-founder exit
The first step is documenting reality: contributions, roles, distributions taken, and anything in writing that shows an agreed split. From there the goal is a separation agreement with a buyout number and payment terms, a release, IP assignment, confidentiality, and a clean operating agreement for whoever remains. Filing an updated annual report with the Florida Division of Corporations, due by May 1 with a $138.75 fee and a $400 late penalty, does not transfer anyone's ownership interest. Only a signed assignment does that.
Chapter 605 will write your exit terms if you do not. Braslow Legal works with Florida and New Jersey founders to resolve departures and put real agreements in place for the business that continues. Reach out through the site to talk through your situation. This page is general information, not legal advice for your specific matter.