When starting a business you have a few options in terms of business structure. Typically the choice is between operating as a sole proprietor (if you are one person), a partnership (if you are two people), and then finally forming a Florida LLC or corporation. Limited liability companies (LLCs) are businesses built on a specific structure. They are unique to forming a business in the United States and provide a high level of liability protection.
Forming an LLC means that your business will be a completely separate entity. Members (owners) of an LLC are not personally liable for the company's debts or liabilities. While combining certain aspects of a corporation, they also incorporate tax benefits of a partnership or sole proprietorship.
When your business is considered a sole proprietorship or partnership, you are considered one and the same with your business. LLCs are completely responsible for their own debts, which means that the members (owners) are not. It also means that if your business partner or an employee is accused of negligence, your personal assets will be safe. The same cannot be said about a sole proprietorship or partnership, you will be completely open to losing your personal assets should something go wrong.
Corporations do offer limited liability, but there are a huge number of hoops to jump through. Although sometimes this can be important for the management of a huge enterprise, when it comes to small, medium, and ever large businesses, this is unnecessary.
Rather than being required to hold shareholder meetings, make annual reports, and be required to take substantial record keeping, this is omitted with an LLC. The only paperwork required with an LLC in Florida is the formation paperwork and annual filing fee.
When formed anonymously one of the benefits of an LLC is that it protects the privacy of its owners. By using a registered agent who is not a member of the business, you can keep your name completely unassociated with your business.
LLCs have huge tax advantages that include the ability to elect taxation. Because LLCs do not have their own federal tax classification, they can choose to be taxed as a sole proprietorship, partnership, S corporation, or C corporation.
Additionally, LLCs are classified as a “pass-through” entity. Pass-through taxation occurs when an LLC does not pay LLC taxes or corporation taxes. Instead, the profits and losses are passed on to the owners. Owners should pay taxes on their personal tax returns for any profits. They will then be able to write off any business expenses.
LLCs offer asset protection benefits. This makes an LLC a great option for small business owners, as well as sole proprietors and partnerships. Not only does it offer asset protection benefits, but it also concerns the actions of the other members, and allows for a lot of tax benefits.
Professionals that often operate under an LLC include, lawyers, doctors, architects, engineers, accountants, chiropractors, and real estate investors.
Forming an LLC requires a good amount of paperwork, which a business lawyer can help with. This may include establishing the LLC and ensuring you maintain compliance. Hiring a business attorney means that you will have help to understand if an LLC is the best option for you, and to define the financial and management structure of your LLC as you grow.