In short, the answer is yes. A closely held Florida corporation can have a different split between the owners for voting and ownership and/or profit sharing.
Under Florida Statute § 607.0731(1), “Two or more shareholders may provide for the manner in which they will vote their shares by signing an agreement for that purpose.” As long as the owners provide in their shareholders’ agreement what their voting split will be, such a split should be allowed, despite it being different from the ownership, or profit-sharing, split.
What is a closely held corporation?
According to the IRS, a closely held corporation is a corporation that “has more than 50% of the value of its outstanding stock owned (directly or indirectly) by 5 or fewer individuals at any time during the last half of the tax year.” A closely held corporation is also referred to as a closed corporation.
What is the Controlling Florida Law for a Closely Held Corporations?
The Business Organizations Florida Business Corporation Act controls Florida corporations. Interestingly, the term “closely held corporation” appears nowhere in the Act. Florida law does not make a distinction between a corporation with few or many owners, or shareholders.
In 1953, the Florida Supreme Court held that a corporation, despite the number of owners, is controlled by the Business Corporation Act. However, one exception exists. Under Florida Statute § 607.0732, a corporation with 100 or fewer shareholders may enter into a special type of shareholder agreement that may not be consistent with all provisions required by the Business Corporation Act.
Why Would You Want Different Voting and Ownership Power?
You may come across a scenario where you own a small corporation in which the owners, or shareholders, have unequal ownership or profit-sharing but wish to have an equal controlling vote. For example, two owners of a corporation may have a 30/70 ownership, or profit-sharing, split, but may wish to have a 50/50 voting split. In other words, despite not earning equal profits from a shared corporation, the owners may wish to have an equal controlling vote. In this case, as long the corporation’s shareholders’ agreement provides that the owners will have a 50/50 voting split, such a split should be allowed, despite their 30/70 ownership, or profit-sharing, split.