This post uses hypothetical scenarios for illustrative purposes only. It does not describe any actual client, transaction, or representation, and is not legal advice.
A common Florida LLC closing problem plays out this way. The target is a Florida LLC — say a Jacksonville healthcare-services roll-up with twenty-two members. Nineteen members vote to approve the merger. Two abstain. One votes no, and three weeks before closing sends a one-paragraph letter asserting “dissenters’ rights.” The buyer’s counsel reads the operating agreement, finds no mention of appraisal anywhere in it, and concludes the dissenting member has nothing. The deal has a closing condition that requires all members to be cashed out at the deal price. The dissenting member’s three-percent stake is suddenly a closing problem.
The operating agreement is the wrong place to look. The right place is section 605.1006 of the Florida Revised LLC Act, which gives a member of a Florida LLC a statutory right of appraisal in a merger, conversion, or interest exchange unless the operating agreement opts out of those rights. The Delaware default is the opposite — LLC appraisal in Delaware is opt-in by contract, not opt-out — and out-of-state M&A counsel who walk into a Florida deal carrying the Delaware default assumption miss the issue routinely. The dissenting member does not need the operating agreement to support his position. The statute does the work by default.
This is a recurring blind spot among out-of-state practitioners, and it is one of the genuinely material structural differences between Florida LLC practice and Delaware LLC practice. The default rules diverge in ways that change deal structure, change the closing-condition calculus, and occasionally change the price. For any merger or interest exchange involving a Florida LLC target, the appraisal-rights question belongs in the diligence checklist before the term sheet is signed, not three weeks before closing.
Delaware’s default and Florida’s default are opposites
The Delaware LLC Act is famously contractarian. Section 18-210 of the Delaware LLC Act provides for appraisal rights only if the LLC agreement says so. No appraisal default. The drafting move in Delaware is affirmative — if a sponsor or a founding member wants appraisal rights, the operating agreement has to include them. The vast majority of Delaware LLC agreements are silent, which means members have no statutory right to demand fair value in a cash-out merger. The deal lawyer’s playbook in Delaware reflects this default: the merger documents do not need to engineer around appraisal because there is no appraisal to engineer around.
Florida’s default runs the other direction. Under Chapter 605 — the Revised Florida LLC Act, which has been in effect since 2014 — a member of a Florida LLC is entitled to dissenters’ rights in a broad set of transactions, including mergers, interest exchanges, and conversions to a different entity form. The trigger is statutory; the appraisal procedure tracks the analogous procedure in the Florida Business Corporation Act for corporations. A member who properly perfects the right is entitled to receive “fair value” for their interest, determined as of the day before the corporate action was authorized, with statutory interest running from the effective date.
The asymmetry is real. A buyer doing a Florida LLC acquisition under the Delaware playbook is doing the wrong playbook. The closing-condition language, the consent solicitations, the back-channels with the holdout members — all of it has to be calibrated to a regime in which a single dissenting member can force a fair-value determination, and the fair-value standard in a Florida proceeding does not necessarily track the price the controlling members agreed to.
What “fair value” actually means in a Florida appraisal
The fair-value standard under Florida law is the same statutory standard that applies to corporate appraisal under § 607.1302 of the Florida Business Corporation Act. The courts have applied it with reference to the underlying enterprise value of the company, not the negotiated price between the controlling members and the buyer. That is the move that surprises out-of-state buyers most often.
The negotiated price in a private LLC sale is a function of many things, several of which have nothing to do with the underlying enterprise value of the company. The buyer’s strategic position, the seller’s tax planning, the rollover structure, the timing pressure on the controlling members, the diligence findings about the target’s customer concentration — all of these move the negotiated number around. A fair-value determination in a Florida appraisal proceeding strips most of that away and asks a more abstract question: what would a willing buyer pay for the dissenting member’s pro rata interest in the company’s enterprise, viewed as a going concern, on the relevant valuation date.
That number can be lower than the deal price, in which case the dissenter has made a bad bet and the appraisal procedure costs them money. That number can also be higher than the deal price, in which case the deal price is exposed. The asymmetry is uncomfortable for buyers who priced the transaction assuming all members would be cashed out at one number.
The drafting move that should be standard but isn’t
The Florida LLC statute allows the operating agreement to opt out of appraisal rights. The opt-out has to be specific — a general “members waive all rights not granted herein” clause is not sufficient — but a clean clause that affirmatively says “members of the company shall have no right of appraisal or dissenters’ rights with respect to any merger, interest exchange, or conversion of the company under § 605.1006 or otherwise” will do the work.
Most Florida LLC operating agreements do not contain that opt-out. The reason is partly path-dependence — the form documents that get used for Florida LLCs are often Delaware forms with the state changed at the top — and partly because the moment to write the opt-out is at formation, when the members are not yet thinking about the eventual exit. By the time the M&A counsel is reading the operating agreement at sale, the opt-out window has been closed for years, and amending the operating agreement to add an opt-out at the deal stage requires unanimous member consent in most form agreements, which means the dissenting member can block it.
The right time to write the opt-out is at formation. The right form clause is short and explicit. The cost of doing it later — measured in deal-stage friction, holdout-member leverage, and occasional closing-condition failures — is much higher than the cost of doing it at the right time.
If you cannot opt out, you have to engineer around
For a Florida LLC where the operating agreement is silent and the merger is imminent, the engineering options are limited but real. The first is to accept the appraisal risk and price it. A dissenting member with a three-percent stake creates a contingent liability of “three percent of fair value, payable on appraisal judgment,” and that liability can be reserved against in the closing flow of funds. The reserve has to be sized realistically — at a multiple of the deal-price equivalent — because a fair-value determination can come in materially above the deal price, especially in deals where the negotiated price reflected seller-side concessions.
The second is to engage the dissenting member directly. Florida law gives the member the appraisal right; it does not require the member to exercise it. A pre-merger settlement at a small premium to the deal price often resolves the issue, and the cost of the premium is generally much smaller than the cost of running the appraisal procedure to judgment, which is litigated in the Florida circuit court and can take a year or more.
The third, and most aggressive, is to restructure the transaction to avoid triggering § 605.1006. The statute is triggered by a merger, an interest exchange, or a conversion. A transaction structured as a sale of the company’s assets followed by a distribution to the members in dissolution does not technically trigger the appraisal right under the same statutory mechanic — though it triggers different statutory concerns under the dissolution provisions, and the structuring move is more often theoretically clean than practically useful in a deal that is already largely papered.
One last point about the Florida business courts
Florida’s relatively new business court divisions, which now sit in several judicial circuits and have specialized dockets for commercial disputes, have begun developing a Florida-specific body of LLC merger and appraisal jurisprudence. The body of case law is still thin compared to Delaware’s, but it is growing, and the Florida business court judges have shown a willingness to engage with the fair-value question with the kind of valuation rigor that has historically been associated with the Court of Chancery. Good corporate governance practice for Florida LLCs increasingly has to assume that an appraisal proceeding will be litigated by a judge who has done five of them before, not by a judge for whom this is the first one.
That is a development buyers should welcome. The predictability of the forum makes the appraisal risk easier to price, and the rigor of the fair-value analysis makes the holdout-member calculus more honest on both sides. M&A practitioners doing Florida deals should not be doing them on Delaware assumptions.
If you are a buyer or seller working on a Florida LLC transaction, or a founder thinking about the operating agreement at the formation stage for a Florida company you expect to eventually sell, feel free to reach out to my firm manager, Magda, at Magda@montague.law, or fill out our contact form. Mention you read this post.
— John
