Corporation | Limited Liability Company | Joint Venture | Agreements
In business it is true that an ounce of prevention is worth a pound of cure. The choice of entity affects fundamental matters of the business and has far reaching implications. The initial decision will usually be determined by considering some or all of the following characteristics in light of the particular concerns of the owners and the anticipated needs of the business: (i) Tax treatment of the entity, its owners and its employees; (ii) Anonymity of ownership and asset protection; (iii) Formation expenses; (iv) Limiting the owner’s obligations for the entity’s liabilities; (v) Restricting the transfer of ownership interests in the organization; (vi) Enticing future venture capital financing or outside investment: (vii) The obligations of board of directors and management to the company’s owners and creditors; (viii) Rules relating to deadlocks in the management of the entity; and (ix) Regulatory considerations. All of these factors help determine the most appropriate type of corporate legal entity for operation of your new Sarasota or Manatee County Florida business. It can be a: Florida Corporation, Florida Partnership, Florida Limited Liability Company (LLC) or Florida Limited Partnership (FLP). Continue reading to learn more about the advantages of each type of entity.
Limited Liability Company ("LLC"): A Florida Limited Liability Company is formed upon the filing of its Articles of Organization with the Florida Division of Corporations. Once established, the Florida LLC operates pursuant to the terms of its Operating Agreement. Basic elements: (i) either Member-managed or Manager-managed; (ii) liability is limited to how much each member puts into the company (personal investment) except any business debt that is personally guaranteed (business loan or line of credit); (iii) management may be exercised by one or more managers (who need not be a member) or by one or more of the members; and (iv) the types and number of members is unrestricted. Most importantly, a creditor of a member of a multi-member LLC is limited to a charging lien against the members interest. An LLC has multiple tax options (see through entity, partnership or corporate).
C - Corporation: A Florida Corporation is formed upon the filing of its Articles of Incorporation with the Florida Division of Corporations. Once established, the Florida Corporation operates pursuant to the terms of its Bylaws. Basic elements: Subject to tax as a separate legal entity (double taxation); Dividends (distributions out of earnings and profits) are subject to tax at the shareholder level; Shareholders are not personally liable (unless they issue a guarantee) for corporate obligations; and Entity is managed and controlled by its officers and directors.
S – Corporation: A Florida pass-through legal entity with no corporate level tax. Basic elements: Shareholders report and pay tax on their pro rata share of income, losses, deductions, etc.; Stock owners reduce their federal income tax bill by paying themselves a reasonable salary (subject to payroll taxes) and a dividend (distributed free of employment tax); May only have one (1) class of stock; less than 100 shareholders; and restrictions on ownership.
Limited Liability Partnership ("LP"): Treated as a Florida legal entity while its income is taxable to its partners (General Partner and Limited Partners). General partners have unlimited joint and several liability for partnership obligations while a limited partner is liable only to the extent of his or her contributed capital and any agreement to contribute capital.
Sole Proprietorship: Not a designated Florida legal entity. Basic elements: It has no formation requirements; Income (less expenses) are taxed directly to the Florida business owner; The Florida business owner is liable for all debts and receives no personal liability protection; and The Florida business owner will have complete control over the operations of the enterprise.
We are able to assist you with all your Florida business and Corporate legal matters:
- Selection, incorporation and formation of the proper Florida business entity
- Drafting & negotiation of Shareholder, Partnership and LLC Operating Agreements
- Drafting and negotiation of contracts (lease, employment, rental, government, etc.)
- Purchase and sale of business assets (real estate, patents, etc.) & corporate entities
- Passing the family business on to the next generation
- Representation of shareholders, LLC members and partners on issues pertaining to shares, management delegation, limited liability, mergers, corporate takeovers, transfers, and liquidations.