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).
Reasons to Form an LLC in Florida
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.
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.
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.
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
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.
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.
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.
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 teh same page. It can also be referred to should there be any conflict in the future.
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.
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.