There are several business entities options available in Florida. These include corporations, limited liability companies (LLCs), general partnerships, limited partnerships, and sole proprietorships. So, which is best for you? The best course of action is to discuss with an attorney what you hope to accomplish in setting up your business to determine what type of entity you should use. Below is a brief description of the basics for each entity type.
WHAT IS A CORPORATION?
A corporation is an independent legal entity that exists separately from the people who own, control, and manage it. It has the ability to enter into contracts, pay taxes, transact business. The owners of a corporation have limited liability compared to several other entities. Furthermore, a corporation does not dissolve when its owner(s) (or shareholders) die because it is considered a separate “person.”
WHAT IS AN LLC?
A Limited Liability Company (LLC) is similar to a corporation in some respects, but with a few slight differences. Like a corporation, an LLC offers limited personal liability but is not required to hold regular stockholder or management meetings, and there is no requirement to comply with other corporate formalities required by a corporation.
WHAT IS A PARTNERSHIP (GENERAL or LIMITED)?
A Partnership is created when two or more persons co-own a business and share in both the profits and losses of that business. Each of the owners or “partners” contribute something to the endeavor, whether it be financial contributions or real property.
Florida Statute Chapter 620 recognizes two types of partnerships: General Partnerships and Limited Partnerships.
In a General Partnership, the rights and responsibilities are divided equally among the partners. These partners are referred to as general partners because each partner can act on behalf of all the partners and each partner is responsible for the partnership’s debts and obligations.
To register a Florida General Partnership, download and mail a completed Partnership Registration Statement along with a $50 filing fee to the Florida Division of Corporations.
A Limited Partnership is comprised of both general and limited partners. Unlike general partners, limited partners are not responsible for the partnership’s actions, debts and obligations. This type of partnership allows each partner to determine and/or limit his or her personal liability.
While general partners have the right to manage the business in return for their personal liability exposure, limited partners do not hold this right. Both general and limited partners, however, benefit from the business’s profits.
WHAT IS A SOLE PROPRIETORSHIP?
A sole proprietorship is usually the simplest and most common structure chosen to start a business. It is unincorporated and owned and operated by one individual. This entity has no distinction between the business and the owner. When not operating under the owner’s legal name, sole proprietorships must register a fictitious name with the Florida Division of Corporations.
However, there is also significant risk associated with this type of business entity. This is because there is no legal differentiation between you and the business. As a result, a sole proprietorship does not afford any protection for your personal assets if you are sued or encounter serious financial difficulties. This means if you choose a sole proprietorship, it is important to consult with legal and financial professionals who can help identify ways to mitigate this risk.
In the end, a number of factors will play a part in determining the type of entity you decide to form for your business. The above information is just a brief overview of what each entail. We recommend sitting down with a knowledgeable attorney and discussing these factors so that they can help you determine the best fit for you and your business.
Related Article: Steps to Obtaining Florida Residency