If you are interested in starting a new business in Florida, you have probably wondered about the best business structure. There are several different types of business entities in Florida, ranging from sole proprietorships, to partnerships, to LLCs, to corporations. In Florida, the Limited Liability Company structure has become incredibly popular. An LLC is a business structure that provides strong liability protection usually afforded to corporations. It also allows for the flexibility, tax advantages, and simplicity of a partnership entity. An individual owner or a group of owners can use the LLC structure.
What is an LLC in Florida?
A limited liability corporation or LLC is a legal business structure that is available for Florida business owners. Business owners who operate the LLC are members. LLC members can expect the same management and tax advantages along with the other benefits that partnership structures enjoy.
Forming an LLC is Relatively Simple
Corporations are challenging and complicated to set up and run. Setting up an LLC is much easier than forming a corporation. The paperwork is less complicated. LLC owners are not required to record resolutions or keep minutes. LLC owners also enjoy the flexibility to decide on their own management structure.
The Benefits of Pass-Through LLC Taxation
LLCs are free from taxation at the state level. Additionally, members have an option to decide their own tax treatment regarding federal taxes. The IRS considers LLC organizations as disregarded entities when it comes to federal tax liability. For tax purposes, LLCs are pass-through entities. All of the profits made by the LLC pass through to the members in terms of taxation. The LLC itself does not pay corporate taxes.
LLC profits are not considered earned income and are not subject to the self-employment tax. In Florida, LLC entities do not face corporation taxes. The same principles apply when the company faces a loss for the year. All of the LLC members can claim the loss on their personal tax returns. Doing so will lower their tax burdens.
Pass-through taxation is a unique advantage for LLC structures. For example, pass-through taxation avoids the problem C-corporations face. With C-corporations, the profits are taxed as business income and then again on the owner’s personal income tax returns. The IRS allows LLC entities the ability to decide on its own taxation form. Members can choose a corporation or a partnership tax structure. At BizLaw, our lawyers can evaluate your business’ financial information and goals and advise you as to the most beneficial tax structure for your business.
Liability Protection for LLC Members
LLCs are similar to corporations because they shield owners from personal liability for business debts. Typically, the private assets of the owners are protected from business creditors. The homes, personal bank accounts, cars, and private investments of the owners are usually protected. One exception to the general rule could happen when a member guarantees a debt of the LLC using his or her personal assets. In this case, the LLC member may be personally liable for related credit.
LLC Management Structure and Business Ownership
Florida does not have restrictions on how many members an LLC can have. In Florida, a business owner can form a single-member LLC, which some states do not allow. Or, you can create an LLC with an unlimited amount of members. An LLC formation can be an excellent option for a freelance worker or a professional services private practice. Creating an LLC can allow a freelance worker to avoid paying freelance taxes, which can be incredibly burdensome.
Florida’s LLC Act allows LLCs to designate managers who are not members. Or, the LLC can be managed by the owners. The latter arrangement is more convenient when the LLC owners do not have the experience necessary to successfully run a business. Hiring a manager can give an owner the time he or she needs to focus on his or her own work.
How to Start Up an LLC in Florida
LLC startup costs and yearly fees are more expensive for LLC owners than for sole proprietorships or general partnerships. The members of an LLC are not provided blanket legal protections, but they are afforded some protection. If you are interested in setting up an LLC in Florida, you should consider taking the following steps:
- Choosing a name for your LLC
- Appointing a registered agent for your LLC
- Filing Your Articles of Organization
- Preparing an LLC Operating Agreement
- Complying with Other Tax and Regulatory Requirements
- Filing an Annual Report
Florida law requires that all LLC companies file an Article of Organization with the Florida Division of Corporations. The Articles of Organization must include all of the following information:
- The mailing address and the street of the LLC’s principal office
- The address, name, and signature of the LLC’s registered agent
- The addresses and names of the managers of the LLC
- The effective date of the LLC other than the filing date, and
- The signature of an authorized representative or member
The filing fee is $125 and members have the option of filing by mail or online. You will need to prepare an operating agreement. Even though doing so is not required by federal law, it is highly advisable. Understanding the responsibilities and rights of the members and managers will help members maintain their limited liability. You will need to file annual reports in order to keep your status as an active LLC.
Our Florida LLC Lawyers can Help
If you are starting a business in Florida, you probably have lots of questions about the best way to go about doing so. You may be worried about protecting your personal assets such as your home and car. At BizLaw, we offer a full array of corporate services. We understand how most small business owners do not have the luxury of hiring expensive legal representation. Our lawyer offers economically sound legal advice, particularly when it comes to business formation. Contact Bizlaw today to learn more about our business consulting legal services. We offer potential clients a complimentary initial consultation.