ADVANTAGES OF FORMING A FLORIDA LLC
Basics: A Florida LLC combines the liability protection of a corporation with the tax treatment and ease of administration of a partnership.
Pass-through taxation. Florida LLCs enjoy pass-through taxation where the members (owners) report their share of the LLC's profit or loss on their individual tax returns. Any tax due is then paid at the individual level. Multi-member LLCs file an informational (partnership) tax return for the LLC, while single-member LLCs report all income or loss on Schedule C.
Flexibility. Florida LLCs generally have no restrictions on the number of members allowed, and members have flexibility in structuring management of the company. Florida LLCs can also select varying types of distribution of profits.
Formalities. The Florida LLC requires no corporate minutes or resolutions, making it easier to manage.
Subsidiaries. Unlike Florida S corporations, Florida LLCs are allowed to have subsidiaries without restriction.
Articles of Organization | Operating Agreement | Membership Rights
FLORIDA LIMITED LIABILITY COMPANY - FORMATION REQUIREMENTS
A limited liability company (LLC) is a statutory form of business association that is designed to give members (investors) limited liability as in a corporation, and federal, but not state, income tax benefits as in a partnership. The management of an LLC may be vested in its members or elected managers, but none are personally liable for its debts and are generally governed by Operating Agreements. LLCs are not required to have Board of Directors or Officers as with a corporation, but may do so. The LLC’s profits are shared amongst its members as laid out in its Articles of Organization, and its distributions are handled as in a corporation. A member of an LLC may freely transfer his interest in its profits and losses, but may not transfer its management without the unanimous consent of the LLC’s other members. Also, there is to be no return of a member’s capital contribution to the LLC except with the unanimous consent of its members (or upon dissolution).
· Allows for flexibility related to self-employment tax; the self-employment tax for 2009 is 15.3 % for social security, 2.9 % for Medicare.
· Fewer restrictions as to who can own the LLC.
· It is not necessary that formal meetings be held annually, and business documents need not be scrupulously maintained or filed with the state.
· Allows for flexibility regarding distribution of income and losses (a member may be compensated more or less than the worth of their share in the LLC)
Operating Agreement Basics:
A limited liability company operating agreement structures the financial and functional management of the entity. An LLC’s operating agreement serves to (i) govern its internal operations - it acts as an official contract to which its members must adhere; (ii) formalizes the entity status of the LLC - providing its members with increased protection from personal liability; and (iii) clarifies and memorializes in writing whatever terms members may have agreed to orally. Without this formality, it is difficult to guard against misunderstandings and conflicts. It is also an important planning tool in that it can restrict and require transfers to third parties, and specify members’ rights (under circumstances of divorce, disability or death). Other provisions to consider for your operating agreement include the following: (i) The percentage of members’ ownership in the LLC; (ii) The members’ voting rights and responsibilities; (iii) The powers and duties of members and managers; (iv) A proposed distribution for the LLC’s profits and losses; (v) Buy-Sell Agreement and terms; (vi) The method and frequency of holding meetings; (vii) Non-compete provisions; (viii) Capital contribution provisions relating to the requirement to make additions of capital to the entity; and (ix) The procedures for the transfer of interests in the event of a member’s death, etc.).