One of the most important decisions a new Florida business owner makes involves choosing the correct Florida business entity. In fact, this choice affects the company’s entire future, including:
- Cost of formation,
- Management,
- Recordkeeping, and
- Tax Status.
Let’s look at the four most common business structures.
#1. Corporation
You already know that a corporation is a business structure. One thing that makes it distinct from other types of business entities is that the corporation is a legal entity separate from its owners. In fact, corporations have many of the same responsibilities and rights as individuals.
Other distinguishable characteristics pertain to liability. Shareholders enjoy a certain amount of limited liability. While they participate in ownership and profit-sharing, they are not personally liable for the corporation’s debts.
Under IRS regulations, a corporation can elect to be taxed as an “S corporation.” This strategy allows shareholders to avoid double taxation.
To form a corporation as a Florida business entity, you can use online forms. However, we strongly urge you to contact an experienced business lawyer. Corporate law is complex and best handled by someone with deep knowledge of corporate law.
#2. Sole Proprietorship
Some people prefer to fly solo when it comes to business ventures. One of the most common ways to do so is by forming a sole proprietorship.
As the least formal business structure, this Florida business entity is easier and less expensive to operate. However, limited liability is off the table. The business owner generally is responsible for all company responsibilities and liabilities.
While formation is less formal, it is still important to discuss your circumstances with a business lawyer. Someone with knowledge of Florida business law can advise you, particularly whether this is the best Florida business entity for you to choose.
#3. Partnership
Partnerships consist of at least two partners. Generally, this type of Florida business entity is more formal than a sole proprietorship and less formal than a corporation. However, it is crucial that the partners have a strong partnership agreement. Otherwise, serious legal trouble could arise later in the company’s lifespan.
For example, a partnership agreement usually includes provisions to cover:
- Financing,
- Partnership Contributions,
- Death of a partner,
- Transferring partnership interests, and
- Methods of dispute resolution.
Here, again, we strongly encourage you to have an experienced Florida business lawyer draft or at least review your partnership agreement. Including all provisions with correct, unambiguous language can prevent problems later in your business relationship.
#4. Limited Liability Company
Commonly referred to as “LLCs,” a limited liability company does just what the name implies. The owners enjoy protection from personal responsibility for the company’s debts, obligations, and liabilities.
Formation is fairly easy, although having properly drafted legal documents is still crucial. As for taxation, an LLC’s profits and losses pass directly to its members. The members then pay taxes on their individual annual tax returns.
Call to Discuss Your Florida Business Entity
Attorney Richard Sierra at the Florida Small Business Center assists clients like you with business and litigation matters. As always, Our Goal Is to Help You Succeed™. For an appointment, you may call us at 1-866-842-5202 or use the contact form on our website. We represent clients throughout the State of Florida, including Coral Springs, Coconut Creek, Boca Raton, Delray Beach, Pompano Beach, Sunrise, Fort Lauderdale, Miami, West Palm Beach, Jupiter, Deerfield Beach, Stuart, Port St. Lucie, Orlando, Naples, Fort Myers, Sarasota, Tampa, and surrounding communities.