If you are thinking of starting a business, one of the first decisions you need to make is what type of business organization to choose. The business organization format you select will affect many aspects of your Florida business, such as taxation, liability, ownership, management and control. Each business organization has its advantages and disadvantages.
Sole proprietorship
You are responsible for everything in a sole proprietorship. It does not require any formal Florida registration. You may need to obtain a local business license or a fictitious name registration, if you use a name other than your own.
The main advantage of a sole proprietorship is that it is easy and inexpensive to set up and maintain. You have complete control over your business. You keep all the profits. The main disadvantage is that you have unlimited personal liability for all the debts and obligations of your business. Another disadvantage is that it does not offer any tax benefits or deductions.
Limited Liability Company
An LLC is a popular choice for many small businesses in Floirda. An LLC is a hybrid entity that combines some of the features of a corporation and a partnership. An LLC is formed by filing articles of organization with the Florida Department of State and paying a filing fee. The members can manage the LLC themselves or appoint managers.
The main advantage of an LLC is that it offers limited liability protection to its members. This means that the members are not personally liable for the debts and obligations of the LLC, unless they have personally guaranteed them or committed fraud or negligence. Another advantage is that it offers flexibility in taxation as it can choose to be taxed as a sole proprietorship, partnership, corporation or an S corporation, depending on its members and preferences. This allows an LLC to avoid double taxation and take advantage of various tax deductions and credits.
Corporation
A corporation exists independently from its owners (shareholders). It is formed by filing articles of incorporation with the Florida Department of State and paying a filing fee. A corporation must also adopt bylaws, elect directors and officers, issue stock certificates, hold annual meetings and file annual reports with the state.
The main advantage is that it offers limited liability protection to its shareholders. Another advantage is that it has perpetual existence and continuity. This means that the corporation does not end when a shareholder dies or transfers his or her shares. Income is taxed at the corporate and individual levels.
