LLC is short for Limited Liability Company. This business structure offers more protection and privacy as compared to a traditional corporation. Forming an LLC provides you a variety of benefits, the most beneficial benefit being that of personal liability protection.
Offering the characteristics of a corporation, with the combination of tax benefits of a partnership or sole proprietorship, an LLC provides flexibility. Overall, forming an LLC allows a business’s debts and liabilities to stay within that of the business, and separate from that of its members (owners).
A limited liability company (LLC) is a separate and independent legal entity under the law. It is a separate and independent from its owners just like a corporation is a separate and independent legal entity from its shareholders. This offers the owners of an LLC a number of advantages, most notably limited personal liability for the debts and financial liabilities of the company and tax flexibility.
However, an LLC only comes into existence if and when the law says it does. Thus, in order to enjoy the various advantages of operating your business as an LLC, it is very important that you follow the legal requirement to properly form and maintain an LLC.
Florida is a great state in which to form a new LLC. The state has one of the lowest income taxes in the country and leads the nation in growth prospects. If you are planning or already doing business in the state, here are the five basic requirements for forming an LLC in Florida:
Forming an LLC in Florida can be a daunting task, especially if you aren’t familiar with the legal process. There are a lot of steps to go through just to be sure you have dotted all of your I’s and crossed all of your T’s appropriately.
There are resources to help you through the process and it’s always a good idea to have a legal resource on your side when it comes to the business side of things. You never know when you might need someone to guide you in the process or back you up on things with your new LLC.
We’ve put together a simple guide to help walk you through the details and everything you might need to know about forming a Florida LLC.
Reasons to Form an LLC in Florida
Why would you form an LLC when you can just form a corporation or a sole proprietorship for your business? There are some great reasons that an LLC might be ideal. There are both benefits and downsides, just as there are for other business model structures.
When formed anonymously, an LLC can provide complete anonymity. This is very beneficial when it comes to performing business transactions, or simply keeping your name separate from your company.
Especially in the case of a sole proprietor or partnership, forming an LLC makes you appear professional. Having this professional appearance can allow you to obtain funding that you otherwise may not be able to without establishing an LLC.
Perhaps the most well known, and beneficial, reason of starting an LLC is due to the liability protection it affords a business. Forming an LLC means that your personal assets are safe if your business happens to accrue debts or lawsuits. By forming an LLC, the LLC is liable for the debts and liabilities incurred, but the owners are not.
LLCs enjoy pass-through taxation. This means that the members (owners) will report their share of the profit from the LLC on their personal tax returns. Pass-through taxation means you avoid double taxation that often occurs with corporations.
Not only are LLCs allowed to decide how they wish to be taxed, but there are also no restrictions on the number of members that are allowed. Florida LLCs can also decide how they wish their profits to be distributed. In a partnership, the split is required to be 50-50, but in an LLC you can choose whichever split you prefer.
How to Form an LLC in Florida
Follow these simple steps to form an LLC.
Choose a Location
You can form an LLC in any state that you choose as long as you have a registered agent in that state. Most often businesses choose to form an LLC in their home state. Despite this, there are also other popular states to form an LLC in. Florida is a great place to start an LLC due to pro-business laws and low corporate income taxes.
You will need to settle on a state that will allow you to form an LLC. Your home state is always a great choice but some other popular states for forming LLCs include Wyoming, New Mexico, Nevada, and Delaware.
Choose a Name
The rules governing a name choice for an LLC vary from state to state. In Florida, your name must also be unique in the state, and the following must pertain to your name choice:
- Must include the phrase “limited liability company,” or one of its abbreviations.
- Cannot include words that include government names (such as FBI).
- Cannot include words such as a bank, attorney, or university without additional paperwork. This may also require you to have a licensed individual, such as a doctor or lawyer, to be part of your Florida LLC.
In general, you need to observe the following naming guidelines when choosing a name for your Florida LLC:
- Your LLC's name must end with the phrase Limited Liability Company or one of its abbreviations (LLC or L.L.C.). Restricted words such as "bank", "attorney", and "law office" may require you to file additional documents and may also require one of the members of your LLC to be a licensed professional.
- Your LLC's name cannot incorporate any words that may cause it to be confused with a government agency such as “IRS”, “FBI”, “Treasury”, “State Department”, etc.
- You cannot use a name that has already been registered. To find out if the name is free to use in Florida, you will need to perform a name search. You can do this for free via the Florida Secretary of State's website.
- It is also a good idea to find out if the name you have chosen for your LLC is free to be used as a web address. Although you may not have immediate plans to create a website for your business, you might want to purchase the URL to keep others from taking.
Next up, you need a name for your LLC. The requirements for choosing a name could vary depending on the state. For example, in Florida, your company is required to have L.C., LLC, or some form of the terms limited liability company as part of the business name.
You can check the state’s database to be sure the name you are considering is unique and available.
Choose a Registered Agent
Also called a statutory or resident agent, the registered agent is an individual responsible for receiving mail, important tax forms, legal documents, a notice of lawsuits, and official government information on your behalf. The registered agent must be a full-time resident or corporation in the state of Florida. It may also be you or someone in your LLC.
Florida requires that you nominate a registered agent for your LLC, who will act on your behalf to receive important legal documents and correspondence from the state. You can nominate yourself, another member of the LLC, or a corporate service that has been approved to operate in Florida. However, whomever you nominate as your registered agent, must have a legal address within the state of Florida.
As mentioned above, your registered agent will be responsible for sending and receiving legal documents for your LLC. This includes official correspondences, court summons, and important business documents that, once received, will be forwarded to you immediately.
Finally, your registered agent will also remind you to file the necessary reports. Failure to file the necessary reports or to properly maintain your LLC can result in stiff fines and the possible dissolution of your LLC. Thus, this assistance can be extremely valuable to you.
Florida requires that an LLC appoint a registered agent. This agent is responsible for service of process. This means they will accept the legal documents on behalf of the LLC. They must have a physical street address within the state but it could be an individual or a business entity.
Although an operating agreement is not required for an LLC in Florida, it is a good idea to have one. The operating agreement is a legal document that states the different ownership, operating, and overall procedures of an LLC.
This agreement is important because it ensures all the members of the LLC are on the same page. It can also be referred to should there be any conflict in the future.
Although Florida does not require you to do so, you should also create an Operating Agreement to establish ownership terms and member roles for your LLC. This foundational document is the core of your LLC and will help you maintain your company and further establish your LLC as a separate legal entity.
There are 6 principal sections of an LLC's operating agreement:
- Organization - when, where, and by whom the LLC was created, who its members are, and it's ownership structure.
- Management and Voting - how the LLC is managed and how it's members vote.
- Capital Contributions - which members contributed capital to the LLC and how additional capital may be raised when needed.
- Distributions - how the LLC's profits and losses will be shared amongst its members.
- Membership Changes - the procedure for adding or removing members and how a member can transfer his or her share of ownership in the LLC to someone else.
- Dissolution - the circumstances under which the LLC might be dissolved.
Your LLC's operating agreement is a private document and does not need to be filed with the state. However, it should be updated whenever there is a change in management or membership of the LLC.
Not all states require operating agreements for LLC’s but we recommend that you have one in place regardless of the requirements. This document basically structures your LLC and explicitly states the structure, including members, managers, and the responsibilities of each.
This is a standard business setup that leaves no questions about how things should operate.
Articles of Organization
Also known as the Articles of Formation, these documents must be filed with the Florida Division of Corporations. This can be done online and by mail.
Essentially, the articles of the organization allow you to officially form your business. You will need to provide the name and address of the person authorized to manage your LLC. If you wish to protect the privacy of the owners, you can allow your LLC to be manager-manged, and the manager’s name can be submitted instead.
In order to form your LLC, you will need to file Articles of Organization with the Division of Corporations, along with the appropriate filing fee. The articles of organization are the LLC's official formation documents and, once approved, they create your LLC by state statute. You can file your articles of organization online or through the postal service.
Your article organization should include your LLC's:
- Principal address and a mailing address;
- Registered Agent;
- Managers and Members; and
- Effective Date (the date upon which your LLC will officially begin to exist)
Now, you are ready to file articles of organization and officially create your Florida LLC. You file these with the secretary of state in the division of corporations, or a similar office depending on the state. These articles will need to include the following information.
- Names and addresses of managers
- Name, address, and signature of assigned registered agent
- A street and mailing address for the principal office
- The effective date of the LLC
- A signature from an authorized representative of the LLC
In Florida, the cost for filing articles of organization or formation is $125. They can be filed through the mail or even online.
What is an LLC?
LLC stands for limited liability company. This is a type of business structure much like a corporation but with different rules that pertain to operations and liability. This business structure is specific to law in the United States. It deems that the owners are not held liable for the company’s debts or liabilities.
A limited liability company is a hybrid that uses characteristics from both corporations and partnerships or sole proprietorships and combines them into its own unique format. An LLC protects your personal assets and separates them from the business while also utilizing some of the pass-through tax practices that you see with sole proprietorship setup.
An LLC is made up of members. There can be a single member or multiple members that form the limited liability company.
Why Would Someone Want to Start an LLC?
An LLC offers a mix of the best benefits of corporations, sole proprietorships, and partnerships. All of these have unique characteristics and an LLC grabs from each of these to give you a dynamic solution that provides a myriad of advantages.
For example, a corporation can be owned by another business and offers owners limited liability protection but the owners cannot use profits and losses on their own personal tax returns. Those are strictly held to the corporation.
A limited liability company does not require annual meetings, offers owners limited liability protection, and offers owners the ability to report profits and losses on their personal tax returns as well.
Here is another example. A partnership or sole proprietorship cannot issue stock for the business, while a corporation can. A limited liability company can also issue stock.
You see, there is a cross over. Where one structure draws a line, another fills that place, and limited liability companies often allow you to cross both sides of that line, without having to pick a side.
What Are Some Benefits of an LLC?
The LLC offers an array of benefits. Here are a few, with detail about just what the benefit is.
In an LLC, profits are divvied up among the owners. They report those profits on their individual taxes, which means that the taxes are only taxed a single time. They are not taxed at the corporate level and the individual level but rather just the individual level.
In most cases, the owners of an LLC will not be held responsible for debts or lawsuits pertaining to the LLC. This protects the personal assets of the owners in the event of bad debt or being sued. The only exception to this rule is in the case of fraud or criminal activity.
An LLC allows you to structure the business in a flexible way. You can multiple members or a single member and there are even different ways to manage the members depending on the design of the LLC.
Limited liability companies keep it simple. There is not a ton of paperwork for every piece of the process. You do not have to designate officers and there are no annual meetings required or the requirement for resolutions and recorded minutes.
Who Should Start an LLC in Florida?
Although an LLC can provide immense protection and flexibility, it is not right for everyone. If you have a hobby that loses money consistently, then this does not qualify as a business. This is not necessarily a reason to form an LLC.
Rather, if you run a business as a sole proprietor, or have recently started a business, you may want to consider forming an LLC. It can allow you to reduce personal liability for business debts and lawsuits, while also benefiting from a variety of ownership, management, and tax benefits of a business.
Lastly, you will need to obtain an Employer Identification Number (EIN) from the IRS. Also known as a Federal Tax Identification Number, your EIN is like a Social Security Number for your LLC and is how the IRS tracks your business for tax purposes.
An EIN is also necessary to open a bank account for your LLC and to legally hire employees. EINs are free of charge and can be obtained from the IRS online or through the mail.
While it is certainly possible to create your Florida LLC on your own, there are certain benefits to hiring a qualified business attorney to assist you in the process. For more detailed information on how to form an LLC in Florida and to learn exactly how an experienced Florida business law attorney can benefit you in the process, call our law firm to arrange a no-cost, no-obligation consultation with a qualified Florida business law attorney.
An LLC is a great option for a small business that wants to be able to protect personal assets. This provides the individual owners with protection against business issues and places the liability solely within the confines of the business resources.
A small business should absolutely take a look at this business structure to see if it is right for them. There are some disadvantages. The income and profits pass through to the owners so even if they didn’t receive cash as a disbursement, the individuals may find themselves responsible for paying taxes anyway.
This makes corporation and businesses with high profits unattractive to the rules of an LLC and not a great option.