Starting a business isn’t as easy as choosing an idea and going with it. There is a lot of work to be done especially when ensuring that your business structure is compliant with local legislation. Most importantly, you’ll need to enlist the services of a corporate lawyer skilled in the different aspects of corporate law. Your business structure needs to suit not only the product or service you are offering but your overall business needs and vision.
The Different Types of Business Structures
There are a variety of business structures to choose from, but your choice is dependent on your specific needs.
A closed corporation (C-corp) is limited to approximately 30 – 50 stakeholders. If you’d like to sell your shares in the company, you will need to offer it to existing stockholders before you are able to sell it to anyone else. This type of business structure is ideal for a larger company where only a few members are actively involved in management while others only get involved if absolutely necessary. Other advantages include the fact that there is a distinct separation between personal assets and business assets, protecting stakeholders from personal liability should anything go wrong. The disadvantage of a C-corp is the initial set-up fee which may seem costly to new business owners and there is the risk of double taxation during tax season.
An S corporation (S-corp) is really a misnomer as it really has to do with the tax status of either a corporation or a limited liability company. This is the common choice for businesses in Florida as it allows the generated income of the business to be given to the shareholders. Shareholders then report the income (or subsequent loss) in their yearly personal tax returns. While closed corporations and other business structures may end up paying double the amount of tax on their income from the business, S-corps do not, due to the Tax Reform Act of 1986. Another advantage of an S-corp is that stakeholders are exempt from personal liability should the business go under.
Limited Liability Company
A limited liability company (LLC) can be viewed as a mix of a normal corporation business structure and a partnership business structure. Due to the nature of an LLC, it is able to accommodate a variety of business needs. An LLC can be created by utilizing the services of a corporate lawyer to file the necessary articles with the Florida State Department. While LLCs are perfectly suited for small business owners who’d like to keep their personal assets separate from their company should anything go wrong, it is available for foreign nationals to become members and allows for companies with more than 35 members.
This is the simplest business structure to use when starting a business, but there is no distinction between the assets of the business and personal assets. Your monthly income from the business is merely added to your personal tax return. While it is easy to maintain this type of structure, you need to be aware that the distinct lack of separation between business assets and personal assets means that your personal assets are at risk should the business’ financial obligations not be met.
When you make the decision to start your business, it is advised that you consult a corporate lawyer to guide you through the process. Your lawyer will ensure that all your needs are met and that your company is legally compliant with state and federal law. You’ll also find that your business lawyer will be able to guide you through more than just the creation of your business structure. If you have any questions regarding your business structure, don’t hesitate to reach out to the friendly and reliable team at Gary I. Handin, P.A. Contact us today for more information regarding business structures at (954) 796-9600.