(Newswire.net — October 28, 2020) — When you’re looking at places in the country to incorporate a business, Florida comes up a lot as one of the most popular areas. Setting up a business here gives you several entity types to choose from. You can set up sole proprietorships in many places quickly, but the best value you’ll get is from setting up a limited liability corporation (LLC). Investopedia defines an LLC as a corporation whose members aren’t responsible for the business’s liabilities of debts. There are several significant benefits for LLCs in Florida. From better taxation rates to protecting your assets, you get quite a lot for setting up an LLC in Florida. In this article, we’ll cover why incorporating an LLC in Florida may be well worth the time and effort.
Things to do Before Incorporating an LLC in Florida
The incorporation of the LLC is the easy part of the process. It’s all about filing the forms and ensuring the state has your business registered to operate as a legal entity. Before you file your registration, there are a few things you should have in place, to make the company formation a lot easier to deal with.
Choose a Business Name
While this may seem like an easy choice, in practice it can be quite hard. Florida, like other states, has a list of rules that your business name must conform to before the state accepts its registration. Additionally, you can’t choose a name that already exists in another business within the state. You will have to do a little bit of research to ensure that you can use the name you’ve chosen.
If you decide to change your business name after you’ve already started operating under a particular name, you’re free to do so, although this usually has a lot of paperwork associated with it. Alternatively, you can set up a “doing business as” name, which allows a company to operate under a different trade name.
Determine If You Want Investors
While you do have the option to set up a single-member LLC in Florida, you may want extra capital for immediate expansion or hiring staff. Generally, setting up a business with your own money is a lot simpler, but limits the resources you have at your disposal. The more investors you have in your LLC, the more complex it becomes to navigate repayments, but the easier it is to get capital injection when you need it.
Ownership and Management
Single-member LLCs are easy since there’s only one owner and manager. These are the simplest LLC organizations, but occasionally, you may have multiple people who want to have an active part in managing and running the business. Management structure for a multi-member LLC can be done in several ways:
- If the company has multiple members, and potentially at least one investor, all the members and the investor come together to choose a single person to manage the business.
- With multiple members, and at least one investor, a single person manages the company, BUT they need consent from the other members and the investor before taking any steps that may affect the company’s functioning.
- The LLC has several members and at least one investor, and all members agree to manage the company equally, with votes taken when anything needs to be accomplished within the company that could affect its performance or operation.
Once these details are worked out, the members and the investor or investors can draft up a policy that reflects the way the business is being run. This document serves the dual purpose of outlining the operation of the company to others who may need to audit it as well as remaining the members and investors of their responsibilities.
The benefits that incorporation in Florida offers cover quite a broad range.
Simple Incorporation
While the simplest business structure to set up in Florida is a sole proprietorship, an LLC is relatively simple to register as well. You don’t even need to maintain recorded minutes or resolutions. What’s more, Floridian LLCs don’t limit the maximum or the minimum number of members the LLC has. This lack of limitation has given rise to a particular type of LLC known as the Single-Member LLC (SMLLC). The Balance SMB mentions that SMLLCs are simply LLCs, which only have one person running the show. If you’re a single business owner, then an SMLLC in Florida is a pretty decent choice for a business structure.
Protection from Liabilities
LLCs tend to protect its members from certain types of liabilities. If the business incurs debts or becomes the subject of a legal suit, the members’ assets are protected from litigation. Thus, if the LLC loses the lawsuit, the plaintiff can only claim damages from the LLC, and not from any of the members. This liability protection only extends to the business’s suits. If a plaintiff levels a lawsuit against an individual member, the LLC does not protect their assets. Additionally, previous common-law cases have shown that having multiple members might actually benefit your liability protection.
Pass-Through Taxation
LLCs are typically pass-through entities unless otherwise stated. Profits that the company generates “pass-through” the entity and go directly to members. From there, taxes are calculated at an individual level. LLC proceeds don’t count as earned income, and as such, aren’t subject to Florida’s self-employment tax. Florida doesn’t tax LLCs at all at the state level. LLC’s also have benefits over C-corporations since proceeds from those entities are taxed first at the corporate level and then again when individual members are paid. In essence, the members of c-Corporations are taxed twice, making LLCs a far more profitable business structure.
A Viable Business Structure
LLCs remain one of the most flexible yet useful business structures for small business owners. Whether it’s a single owner or a set of owners that want to use an LLC to help them get better tax rates and ensure their assets remain protected, an LLC can bring with it a lot of benefits. If you’re in Florida, you’d be wasting a golden opportunity by not incorporating an LLC.