Doing Business in Florida: Types of Business Entities
Congratulations. You've made the decision to start a business in Florida. But with so many different types of Florida business entities to choose from (i.e. sole-proprietorship, corporations, LLCs, partnerships, etc.), which one is right for you? The answer depends on a variety of factors and understanding the differences is a vital step in getting started. There are benefits for each type, but choosing the wrong form of business entity may actually increase the potential for liability, costing you more in the long run. Let's take a quick look at a few of the common Florida business structures.
A sole proprietorship is both the most simple and most common business structure to start a business. It's an unincorporated business that's owned by...you guess it: one individual! No distinction is made between the business and its owner, although the business can be operated under a different name from the owner.
Unlike a sole-proprietor, a corporation is a legal entity that's completely independent from it's owner(s). One or more people own, control and manage the corporation, but the corporation itself is able to do business, enter into contracts, and pay taxes. Because the corporation exists separately from its owner(s), the owner(s) of the corporation get to enjoy limited liability; one of the main reasons for forming a legal entity for your business.
Limited Liability Company (LLC)
Similar to a corporation, a limited liability company (otherwise known as an LLC), also offers limited personal liability for its owners. However, unlike a corporation, LLCs do not have to comply with the various corporate formalities that corporations do, such as holding shareholder/management meetings.
A "partnership" refers to two or more people who decide to own a business together. As co-owners, each partner shares in the business profits as well as it's losses. Each partner in the business will typically contribute something (ex. money or property) toward the business. However, forming a partnership to conduct business should be done very carefully. For example, in a general partnership, the rights and responsibilities are divided equally among the partners, known as general partners. Therefore, each general partner has the right and the ability to act on behalf of the other partner(s). Likewise, each partner is also on the hook for the debts as well as the obligations of the partnership! In a limited partnership, the business is made up of general partners as well as limited partners. However, each partner is able to determine and/or limit their personal liability. Limited partners aren't responsible for the debts/obligations or the actions taken by the partnership. The general partners manage the business while the limited partners do not. However, the general partners as well as the limited partners get to benefit from the partnership's profits!
If you are interested in forming a legal entity for your business, contacts the Law Office of Christian Fong, P.A. We can help you determine which structure works best for you.
Author: Christian Fong, Esq. is a Miami based business and intellectual property attorney dedicated to assisting entrepreneurs, startups, as well as small and medium-sized companies, in a variety of industries and at all stages of their businesses. He can be reached at (786) 607-3664; firstname.lastname@example.org.
Disclaimer: The content above is a discussion of legal issues and general information; it does not constitute legal advice and should not be used as such without seeking professional legal counsel. This information is not intended to create, and reading or viewing does not constitute, an attorney-client relationship. All trademarks are the property of the Law Office of Christian Fong, P.A. or their respective owners. Copyright 2016. All rights reserved.