About Florida PLLC
A professional association in Florida is simply a special type of corporation that renders professional services. It is typically used by professionals as it offers extra asset protection for them. Professional services are defined under Florida statute 621 as “any type of personal service to the public which requires as a condition precedent to the rendering of such service the obtaining of a license or other legal authorization.” Examples of these are certified public accountants, doctors, dentists, architects, veterinarians, attorneys at law, and life insurance agents.
Since the professional association is a corporation, any liabilities that arise due to legit business activities are isolated inside of the business. To add to that fact, in a professional association, a co-owner is not liable for any malpractice of another owner. So if the professional association is a law firm, one lawyer is not liable for the malpractice of the other attorney/owner of the firm. You are still liable for your own malpractice.
You can tell if a business entity is a professional association by its name. If the end of the name ends in P.A. instead of Inc. or Co., then you know you are dealing with a professional association.
Finally, one of the other benefits of a P.A. is that if you forget to file your annual report and the State of Florida administratively dissolves the P.A., you can always reinstate the P.A. and the reinstatement relates back to the dissolution date. Contrast that with an LLP. If an LLP is dissolved and then reinstated, the reinstatement date is as of the day you reinstate the LLP. So if there are any acts of malpractice that arise, you are safer with a P.A. than an LLP.
About Florida LLCs
A Florida limited liability company, also known as an LLC, is a type of business entity that combines aspects of a corporation and a partnership. It provides the asset protection of a corporation so that any business liabilities remain business liabilities. However, from a taxation standpoint, it is a pass-through entity by default.
The LLC is my preferred business entity because it is simple to maintain and operate due to fewer levels of ownership/operations. Whereas a corporation has 3 levels, an LLC has either 1 or 2. An LLC has its owners, called Members. The operations level of an LLC is vested in its Managers. However, if a Member is also a Manager, then you only have one level to worry about. In fact, most small businesses start out as LLCs due to its simplicity.
However, the Florida LLC is not the solution for every small business owner. Due to a Florida Supreme Court case and subsequent minor fix by the Florida legislature, an LLC is not recommended for businesses with only one owner. This will become clearer in subsequent blogs.
An LLC is very flexible and can be used for any type of business, including a professional business (PLLC). It can be taxed in many different ways and set up so that management is vested in one individual or many individuals. As stated above, I prefer the Florida for most of my small businesses that are just starting as it seems to offer the flexibility and simplicity that most beginners desire.
So far a sole proprietorship seems pretty simple and straight-forward – and it is in Florida. Remember that you do not need to file any special paperwork to create the sole proprietorship since it is a default business entity in Florida. If you and you alone (this will become important later when I discuss partnerships) sell a product or perform a service with the goal of making money, you are a sole proprietor, whether you want to be or not. If you do not want to be, then you need to file documents to create a different business entity.
Your responsibilities as a sole proprietor is to yourself and society but to now one else in particular. In a typical business, you would owe duties to the business and your fellow owners. Since a sole proprietor is the only owner and is the business, they owe no one else within the business a duty. However, a sole proprietor owes a duty to society to make sure their business venture is not fraudulent, criminal or negatively affect society. This is an important duty because if you do not follow it, you and your personal assets are subject to a lawsuit and judgment.
How to Maintain a Successful Business Partnership
The State of Florida defines a partnership as the association of two or more persons to carry on as co-owners of a business for profit. Under Florida’s Uniform Partnership Act (“UPA”), no filing is required to form a partnership. Therefore, people often find themselves in “inadvertent partnerships” as case law holds that “intent” of the parties defines the relationship. Specifically, the requisite intent to the formation of a partnership is not the subjective intent to be partners, but rather if the parties intended to conduct a for-profit business as co-owners.
One fundamental misstep that befalls most partnerships is their failure to put the partnership agreement (“PA”) in writing, even though it is not required. The UPA provides much flexibility with respect to the parties’ relationship within the PA. In the absence of a writing, or PA, the statute itself attempts to provide a body of default rules that would best serve a small, informal partnership. Therefore, partners should spend time anticipating issues (whether positive or negative) and address them in the partnership agreement.
Other issues facing partnerships pertain to payment of taxes, the difference in payment for employees and business partners, as well as the division of labor between the parties.
One key to a successful partnership is being able to identify each partner’s strengths and weaknesses, and adjust to fit each partner in the day-to-day operations. It is also beneficial to hire a skilled attorney to help identify potential issues in order to negotiate a partnership agreement that’s main purpose is to avoid conflict.