Florida is a business-friendly state that offers streamlined procedures and document filing. Florida does not impose a minimum capital requirement for incorporating a business, directors and officers can be the same person, annual fees are low, and there few corporate reporting requirements. Procedurally, Florida requires the completion of articles of incorporation, filing with the state, payment of incorporation fees, and acceptance by the Florida Secretary of State to start your business.
There are four primary types of legal structures, including corporations, LLCs, sole proprietorships, and partnerships. Each formation can have distinct tax implications, contractual relationships, and financial concerns. Short explanations of these structures are as follows:
Corporations are separate legal entities with rights and liabilities distinct from employees and shareholders. C corporations are usually large companies, publicly traded, and have many shareholders. Profits earned by C corporations are taxed twice, meaning that both the corporation and individual shareholder pay income taxes. S Corporations are typically privately held and smaller than C corporations. Profits of S corporations are taxed only as distributions to shareholders. The Internal Revenue Service (IRS) requires S corporations to satisfy certain requirements, including a limited number of shareholders, in order to obtain this tax status.
Limited Liability Company (LLC)
LLCs provide flexibility by blending aspects of partnership and corporate structures. A hybrid business, an LLC offers the benefits of corporate liability protection and the availability of the pass-through income taxation characteristic to partnerships. The state of Florida allows LLCs to elect whether to be taxed as corporations or partnerships.
Sole proprietorships are not required to file Florida corporate income tax returns. Instead, profits are taxed at the owner’s individual federal tax rate, which can also subject owners to unlimited personal liability to any debts or obligations the business incurs. In Florida, however, liability is limited by the state’s homestead rights laws that prevent creditors from taking the home of a sole proprietorship’s owner.
Partnerships are unincorporated businesses in which two or more people share liability and provide capital. Although partnerships can be formed easily, there are stipulations for their dissolution. Meticulous planning and partnership agreements are very important.