The first question most clients ask me usually ” What Florida business structure is best for my business?” Florida entrepreneurs have a wide range of options available to suit the needs of most any business scenario. This article will examine Florida sole proprietorship, partnerships, corporations, and LLCs.
A sole proprietorship is the easiest to form and occurs when an individual starts the business in his or her own name. A sole proprietorship provides no personal liability protection to a business owner, so a person’s personal and business activities are not distinguished from one another. This type of Florida business structure makes the business owner personally liable for any lawsuits and judgments intended for the business.
A sole proprietorship business structure is not registered with the state of Florida and does not require the filing of corporate income tax returns. Owners of sole proprietorship businesses are taxed once on the owner’s individual federal taxes and may incur an additional tax liability on the business owner’s earnings.
A general partnership is a relationship between two or more people who join to carry on a trade or business. Each person contributes money, property, labor, and/or skill and expects to share in the profits and losses of the business. A written partnership agreement is strongly recommended. This structure is not registered as a business entity and business income is reported on the partners’ individual tax returns.
Limited Liability Partnership (LLP)
A limited liability partnership is a partnership that is registered with the state of Florida. This Florida business structure is governed by the partnership agreement set in place by the parties and provides protection for the partners. The profits and losses of a Florida LLP are passed through to the partners.
A corporation is a separate legal entity that is owned by shareholders. A general corporation may have an unlimited number of shareholders that, due to the separate legal nature of the corporation, are protected from the creditors of the business. A shareholder’s personal liability is usually limited to the amount they invest in the company.
The personal assets of Florida corporate owners are shielded from business debt and liability. Florida corporations also have an unlimited life and extend beyond the illness or death of the owners.
C- Corporation- A Florida corporation with a C-Corporation status pays its own taxes and assumes liability for Florida’s corporate tax rate.
Subchapter S Corporation- A Florida corporation with a Subchapter S status allows its shareholders to share income and expenses and also allows them to report the same on their individual income tax returns. The advantage to this structure is that the corporation does not have to pay the Florida corporate tax.
Limited Liability Company (LLC)
A limited liability company is a registered business entity that combines the elements of a partnership and corporation. A Florida limited liability company allows its owners to enjoy corporate liability protection of their personal assets from business debt. A Florida LLC also allows its owners to take advantage of the pass through tax system enjoyed by partnerships and Subchapter S corporations.