For business owners and those looking to start a business you likely have heard the term, “limited liability.” However, what does limited liability mean for Florida business owners?
Limited liability generally
The legal term, limited liability, in the business entity context refers to business entity structures that limit your personal liability. This means that if your business entity has limited liability, and it faces a judgment, debt, etc., your personal assets are protected. Only your business’s assets are at risk.
For example, if there is a judgment against your business because it owed a supplier $30,000, the judgment can only be paid from the business itself or insurance. Your personal cash and assets are not at risk.
Limited liability in Florida
Limited liability entities in our state are corporations, limited liability companies and limited liability partnerships. All provide limited liability protection to the business’s owners and shareholders.
A corporation is a separate legal entity created under state law. It enters into contracts, can sue or be sued, pays taxes independently and its own assets. Corporate owners are shareholders, who elect management (the board of directors). These shareholders receive limited liability in the corporate entity.
Limited liability companies
LLCs combine corporate and partnership features. LLCs are owned by members who manage the business themselves or appoint managers. The members receive limited liability, and taxes are passed through to them as well. This means that the LLC profits, losses, deductions, etc. are reflected in the members’ personal tax returns.
Limited liability partnerships
LLPs are created by two or more owners (partners) who can be entities or people. Each partner receives limited liability and pass-through taxation.
Making the choice
Whichever business entity you choose to create in Florida depends on your specific situation. Though, with each, you will need to register with the Florida Department of State.