Florida Bar Exam LLCs Explained Through a Story
In this article
Sitting in my golf cart, shamefully listening to Ye’s new album and…enjoying it.
The sun is smeltering. Sweat dripping. Not a breeze in sight.
And that’s when I see it — Mel and Chris’ coconut water stand. A Cutler Bay staple.
Now, you might not know this, but coconut water? Elite hydration. Electrolytes. Exactly what I need right now.
So I’ma park here for a second.
And while I’m sitting here, I’ll tell you a story.
About Mel and Chris — former lovebirds — and the series of events that turned their coconut water business into a full-on lesson in Florida LLC law.
So sit back, relax, and sip some agua de coco while you read this.
Florida LLC Law Explained Through a Story: Mel & Chris’ Coconut Business
Mel and Chris met at the University of Miami.
Business school. Group projects. Late nights. One thing led to another — and before long, they were dating and talking about starting something of their own.
Chris had the money.
Mel had the brains.
And together, they had what they thought was a perfect idea:
a coconut water stand that could turn into a real brand.
They didn’t overthink it.
Chris covered the startup costs — inventory, the stand, permits.
Mel handled the branding — name, logo, marketing, social media.
One weekend, they went online, filled out some forms, and filed articles of organization with the State of Florida.
Boom.
They had an LLC.
No lawyer.
No real conversation about structure.
No operating agreement.
An abuelo. A machete. Ice. Ripe coconuts.
At first, it worked.
Chris started negotiating with local farmers.
Mel started running Instagram and locking in partnerships with local gyms.
They were both making decisions. Signing things. Acting on behalf of the business.
No one stopped to ask:
“Wait… who’s actually in charge here?”
And now here we are.
Their stand? Parked right at that spot — you know it — the one with lines of golf carts before walking along the water.
Prime real estate.
And Chris made sure they got that exact spot.
He paid for it himself — the setup, the permits tied to the location, everything.
But when he filled out the paperwork?
He put it in his own name.
Not the LLC.
Just Chris.
And that… would matter later.
What’s actually happening legally?
- Mel and Chris formed a Florida LLC when they filed articles of organization and had at least one member.
- Under the Florida Revised Limited Liability Company Act, an LLC is member-managed by default unless otherwise provided.
- Because they never agreed otherwise, the LLC is member-managed by default, meaning both have equal authority to act for the business.
- Without an operating agreement, the Florida LLC Act controls their relationship, rights, and duties.
- Even though Chris paid for the stand and put it in his own name, property acquired for the business may still be treated as LLC property, not individually owned.
Exam Triggers
- Default = member-managed → equal authority
- Operating agreement controls over default rules (unless prohibited)
- No operating agreement → statute governs
- Formation requires:
- articles effective
- at least one member
- Ownership ≠ whose name is on title
LLC Property & Contributions: Who Actually Owns the Coconut Stand?
Things were moving.
The stand was busy. Their Instagram was growing. People were actually asking if they franchised (they did not).
But behind the scenes… things were a little less clear.
Chris kept saying:
“I paid for all of this.”
And to be fair — he kind of did.
He bough the stand.
Paid for the first round of inventory. Covered the permits.
Meanwhile, Mel?
She built the brand.
Designed the logo.
Ran the marketing.
Got them customers.
No invoices.
No formal paperwork.
Just hustle… and assumptions.
Then one day, it comes up.
Technically, it happened the day after Chris caught Mel checking out a buff fisherman.
Chris looks at the stand and goes:
“Worst case, I can just take this. I paid for it anyway.”
Mel pauses.
“Wait… you think you own the stand?”
Chris doesn’t answer right away.
Because to him… it’s obvious.
What’s Happening Legally
Under Florida law, anything contributed to the LLC — or purchased with LLC funds — is LLC property, not owned by the individual members.
Even if Chris paid for the stand, if it was acquired for the business, it belongs to the LLC.
Not Chris.
Not Mel.
The LLC.
Exam Triggers
- Property contributed to the LLC = LLC property
- Property purchased with LLC funds = LLC property
-
Members have no ownership interest in specific LLC property
Mel smiles a little.
“So no… you’re not taking the stand.”
But then Chris fires back:
“Fine. But I put in way more than you. You barely contributed anything financially.”
What Counts as a Contribution?
Florida law recognizes a contribution to an LLC can be:
- Money
- Property
- Services
- A promise to contribute
So Mel’s branding, marketing, and work?
That counts.
Now Chris gets an idea.
“Okay… then you said you were going to put in $10,000 later. Where is that?”
Mel hesitates.
“Yeah… about that…”
What Happens If a Contribution Isn’t Made?
A promise to contribute is enforceable only if it is in a signed writing.
If it is enforceable and not fulfilled, the LLC may:
- Require the promised contribution, or
- Require payment of its value
Exam Triggers
- Contributions can include money, property, or services
- Promise to contribute → must be in writing
- Failure to contribute → LLC can seek money or performance
Chris leans back.
“So… do we even have that in writing?”
They both sit there for a second.
In silence.
No operating agreement.
No written contribution terms.
No clarity.
And now?
That’s starting to matter.
LLC Distributions & Personal Liability: When Chris Pays Himself
By now, the stand is doing well.
Like… really well.
Lines down the golf cart path.
People coming back daily.
Someone called it “the Erewhon of Cutler Bay” (no one knew what that meant, but it sounded expensive).
Money is finally coming in.
And Chris?
He’s been waiting for this moment.
One afternoon, Mel walks up and notices something off.
“Why does the account look… lower?”
Chris doesn’t even look up.
“Oh yeah, I paid myself.”
Mel blinks.
“You… what?”
Chris shrugs.
“I put in the money at the beginning. I figured I’d just take some out now that we’re making money.”
Now she’s staring at him.
What’s Happening Legally
A distribution is money paid from the LLC to a member.
However, the LLC cannot make a distribution if:
- It cannot pay its debts as they come due, or
- Its total liabilities exceed its assets
Florida law prohibits distributions if the LLC cannot pay its debts or if its liabilities exceed its assets.
Exam Triggers
- Distribution = money paid to members
- Not allowed if:
- cash flow test fails
- balance sheet test fails
Mel leans in.
“So you took money… before we paid what we owe?”
Chris shrugs again.
“I mean… we’ll make more.”
Mel just stares at him.
Because that’s not how this works.
Why This Is a Problem
If a member or manager approves an improper distribution,
they may be personally liable for the excess amount.
If a person receives a distribution knowing it was improper,
they may also be required to return it.
Mel doesn’t raise her voice.
Which somehow makes it worse.
“So let me get this straight…”
“You took money out… before we paid debts… and now the business might not be able to cover what it owes?”
Chris finally looks up.
“…when you say it like that…”
Mel just nods.
“Yeah. I am saying it like that.”
And just like that —
what felt like “finally getting paid”
starts looking a lot more like personal liability.
What You Should Take From This (Bar Exam Lens)
- A distribution = money paid to members
- Not allowed if the LLC fails solvency tests
- Improper distribution → personal liability
- Liability applies to:
- the person who approved it
- the person who received it (if they knew)
And now?
It’s not just about coconut water anymore.
It’s about whether Chris just created a personal problem…out of a business decision.
Fiduciary Duties in an LLC: When Mel Competes with the Business
Things between Mel and Chris had been… off.
Not a full breakdown.
But enough tension where conversations got shorter.
More transactional.
Less “we,” more “I.”
Chris was still focused on operations.
Suppliers. Inventory. Numbers.
Mel?
She was focused on the brand.
And she was starting to realize something…
The brand was hers.
One night, she’s scrolling through Instagram.
Ideas flowing.
And then she thinks:
“What if I did this… on my own?”
A few weeks later…
Mel’s Premium Coconut Water launches.
Sleeker branding.
Better packaging.
Same exact customer base.
She doesn’t tell Chris.
At least… not right away.
Eventually, he finds out.
Of course he does.
A regular customer casually says:
“Hey, isn’t Mel’s new brand yours too?”
Chris doesn’t say anything at first.
Just shows up the next day.
Stands there.
Looks at her.
“You’re selling the same thing… to the same people… while we’re still running this?”
Mel exhales.
“It’s not the same. It’s just… different positioning.”
What’s Happening Legally
Mel owes fiduciary duties to the LLC and to Chris.
Under Florida law, members and managers owe fiduciary duties, including the duty of loyalty. This includes the duty of loyalty, which prohibits:
- Competing with the LLC
- Taking business opportunities belonging to the LLC
- Self-dealing or acting adversely to the business
A member may act in their own interest — but not at the expense of the LLC.
Exam Triggers
- Duty of loyalty = no competition, no taking opportunities, no self-dealing
- Breach occurs when a member:
- competes with the LLC
- takes an LLC opportunity
- acts adversely to the business
Chris nods slowly.
“So… you’re using what we built… to build something for yourself?”
Mel doesn’t answer right away.
Because she knows.
This isn’t just about branding anymore.
Important Nuance (Testable)
A member does not violate fiduciary duties merely by acting in their own interest.
However, a breach occurs when a member:
- Competes with the LLC
- Takes business opportunities belonging to the LLC
Chris finally says it:
“You can’t do both.”
And now, for the first time —
this isn’t just a business disagreement.
It’s a breach of duty.
What You Should Take From This (Bar Exam Lens)
Members and Managers owe:
- duty of loyalty
- duty of care
- duty of good faith
Duty of loyalty = most tested
Competing with the LLC → breach
Taking LLC opportunities → breach
Transferable Interests in an LLC: What Alex Actually Bought
At this point… things between Mel and Chris aren’t great.
Not broken.
But definitely not what they were when this started.
Mel’s frustrated.
Chris is frustrated.
And neither of them feels like they’re getting what they deserve out of this anymore.
Alex is excited.
Shows up the next day like he just acquired a startup.
Talking big.
Throwing around ideas.
Looking at Chris like:
“So what are we thinking for expansion?”
Chris pauses.
“…who are you?”
Mel jumps in.
“I sold him part of my interest. He’s in now.”
Alex nods.
“Yeah, I’m ready to help run things.”
Chris just looks at him.
“No… you’re not.”
What’s Happening Legally
A member may transfer their transferable interest in an LLC.
However, that transfer only gives the transferee the right to receive distributions.
It does not grant:
- management rights
- voting rights
- access to control the business
A transferee becomes a full member only if admitted by the other members.
Exam Triggers
- Transferable interest = economic rights only
- Transferee:
- no management rights
- no voting rights
- no control
- Full membership requires consent of the other members
Alex frowns.
“Wait… so I can’t vote?”
“No.”
“Make decisions?”
“No.”
“Access everything?”
“No.”
Mel looks confused now.
“Then what did he actually buy?”
Answer
The right to receive the distributions Mel would have received.
That’s it.
Chris leans back.
“So unless we agree to admit him as a member…”
“He’s just along for the ride.”
Key Rule
A transferee becomes a full member only if admitted by the other members.
By default, this requires consent of all members.
Alex sits there.
Processing.
“…so I paid for this… and I don’t get to run anything?”
Chris shrugs.
“Welcome to the School of Hard Knocks.”
What You Should Take From This (Florida LLC Recap)
Bar Exam Takeaways
- Transferable interest = right to distributions only
- Transferee ≠ member
- No management rights
- No voting rights
- Full membership requires consent of all members
And just like that…
Mel tried to fix the situation by bringing someone in.
And accidentally made it more complicated.
Mel and Chris didn’t set out to learn LLC law.
They just wanted to sell coconut water.
But in the process, they ran into:
- Who controls the business
- Who owns the property
- Who gets paid
- What happens when things go wrong
And if you can follow Mel and Chris…
you can answer Florida LLC questions on exam day.
Now go grab a coconut.
Maybe a little rum.
You’ve earned it.
Quick memory trick:
If you blank on an LLC question…
think coconut.
Think Mel and Chris.
The rules are in the story.
These rules are drawn from the Florida Revised Limited Liability Company Act (Chapter 605, Florida Statutes).
