When forming a new business, you have a lot of decisions to make. Choosing the business structure of your new business is one of the most important decisions you can make, and you have a few options. You can choose to form as either an LLC, corporation or sole proprietorship/partnership.
Forming as an LLC offers you a business structure where you are not liable as an owner for the company’s debts or liabilities. Essentially, an LLC combines characteristics of a corporation along with those of a partnership or sole proprietorship, giving the best of both worlds to members.
What is an LLC?
An LLC, or Limited Liability Company, is a business entity in the united states that combines parts of corporations, sole proprietorships, and partnerships. LLCs are known to have the best of all worlds when it comes to business, offering owners liability protection, flexible management structure, and tax advantages.
This legal entity can be formed for the purpose of owning and operating a business. They are most popular for offering the same limited liability as a corporation. They are also known for being much easier, as well as less expensive, to run and form.
How an LLC is More Flexible than a Corporation
Probably the most obvious advantage to forming an LLC is that it protects your personal assets. This is also afforded to corporations, by limiting the liability to the resources of the business itself. Both LLCs and corporations will also protect your personal assets from claims against the business. Despite these similarities, there are main differences when it comes to the flexibility of an LLC versus a corporation.
These flexibilities include:
- Ability to elect taxation, either as a sole proprietorship/partnership, or corporation.
- An LLC can be a single-owner business, a partnership, or a multi-member structure.
- There is no limit to the number of members in an LLC as there are with a corporation.
- Corporations have formalities and rules set by state laws, LLCs can create their own rules.
- Laws that govern an LLC can be changed through an operating agreement. This can be managed by the members, or the members can elect a manager, or managers, to run the LLC.
- Members of an LLC have equal ownership interest automatically, or the rights can be declared according to a percentage of the LLC that they own.
- The flexibility of the operating agreement allows the LLC to be amended or modified as needed.
Requirements to Start an LLC in Florida
Before you can start your company you will need to meet these Florida LLC requirements.
Business Name
When you create an LLC you will have to come up with a name. The name of your Florida LLC must be unique (available and not taken by another business already) and should be registered with the state in which you form your business.
Registered Agent
Every LLC must have a person or entity appointed to accept service of process and official mail on your business’s behalf. This can be you, one of the members, or you can appoint your business to be its own registered agent.
The registered agent for an LLC has one main function. This is to be an agent “for service of process.” Other functions include receiving legal correspondence on behalf of the LLC. The registered agent must have a legal residence in the state of Florida, and be able to forward all mail and legal documents to the LLC in a timely manner.
Business Licenses and Permits
Depending on what type of business you are forming, you will need a variety of business licenses to operate in your state. This might include:
- General business license
- Tax registrations
- Health permits
- Zoning
- Land-use permits
- State-issued occupational licenses
Tax Forms
There are a variety of different tax forms used for LLCs when filing. LLCs are automatically given pass-through taxation which means all the profits will pass through to the owners, and be paid out on their own personal tax returns.
Operating Agreement
States do not require LLCs to file an operating agreement. Despite this, having one can be great to ensure that if there is an argument between members, you have a document that will be upheld in court.
The operating agreement includes:
- Provisions that may protect the members and the officers.
- Severability clause that allows the operating agreement to survive regardless.
- The operating agreement must be consistent with the Articles of Organization, but the Articles hold precedence.
- Specify the procedures for amending the agreement.
Articles of Organization
The articles of organization are also known as a Certificate of Organization, are required The articles of organization are the proof of the LLC’s existence. This is issued by the state and is required to be filed with the state in which the LLC is formed.
The Articles of Organization provide the basic information of your business, including:
- Name
- Purpose
- Principal and mailing address
- Name and address of the registered agent
- Management structure
- Members
Who is an LLC Best for?
An LLC can be used for a business of any size. Whether you are a single person or a large business with multiple owners. It provides liability protection for others and a structure that is more flexible than that of a corporation. LLC is the most common legal entity used to own rental and commercial property.
Forming a corporation can be a good option for businesses that wish to go public and offer public shares. This can provide a good opportunity to raise capital to grow the business, which cannot be done with an LLC in this method.
Work with a Lawyer to Create Your LLC
Forming an LLC has many LLC Requirements. This means that mistakes can happen. Despite this, by working with a lawyer to form your LLC, you can avoid most of these mistakes and enjoy the many benefits afforded by forming an LLC.
