Many people in Florida have great ideas for businesses. Some may have worked for other companies within a certain industry and want to branch off on their own. This can be an exciting time and people may know the product or the service they will be selling very well. However, there is much more to running a business than simply selling a product or service. One of the first steps in starting a business has nothing to do with finding clients. That step is organizing the business.
This is important because creating a separate legal entity for the business can protect the owners from personal liability for the business. Choosing the right business entity is important. While there are a number of different options that people have for organizing their business, there are a couple that may be the most popular options. Those are corporations or limited liability companies (LLC).
Differences between corporations and LLCs
While both options will protect the owners from personal liability for any obligations of the company, there are differences which people should understand as they choose. LLCs are organized by members who have an equity share in the assets of the company based on their investment. Corporations have a board of directors who run the business and shareholders who share in the equity.
The profits of a LLC pass through to the owners, while the profits of a corporation stay with the corporation. Based on this the profits of an LLC pass through to the owners for tax purposes as well while corporations are taxed separately.
People who start businesses in Florida generally understand what they are selling, but it is important that the form the business correctly. There are some basic differences between a LLC and a corporation, but the differences can be more complicated than it may seem. Experienced attorneys understand the differences and what may be the best fit for a business.