Business Ownership Structures in Florida
Starting a new company can be an exciting experience for both budding entrepreneurs and business veterans alike, but finding the right business ownership structure that suits your line of work can be a daunting task. This is an important decision for any company, as the structure that you choose will affect the taxes you pay, whether you have limited liability or not, and the kind of company registration you need to go through. The state of Florida offers multiple options for structuring your company, and having an attorney who is well versed in the tax and liability implications of each of these options to guide you through the process is vital to finding the right company structure for you. We will give an examination of each of these company structures to assist you in understanding how best you might structure your business.
Sole proprietorship
A sole proprietorship is a simple business structure for single-owner companies that does not need any registration with the state to start operating. It is easy to set up and to dismantle, and all taxes are submitted in the personal capacity of the owner. An important feature of sole proprietorship is that you are not granted limited liability over the company, which means that as the owner you are personally responsible for all actions taken by the business; this includes all debts and commitments. This type of business structure places your personal assets at risk, should your business have financial problems or lawsuits against it. It is very important to consult an attorney before entering any agreements that may put you at risk personally should the company run into financial trouble. Also, if you wish to do business under a fictitious name, such fictitious name must be filed with the Florida Secretary of State. Your attorney can advise as to how this can be accomplished.
Partnerships
A partnership is like a sole proprietorship in nearly all ways, except it allows for multiple owners. This means that multiple people can share in the ownership, profits, and liabilities of a company. It is important in this case to clearly establish the contribution and ownership rights of each member, and having an attorney guide you through this process is the safest way to ensure that the company profits and liabilities are distributed fairly. Like a sole proprietorship, this company structure is best for small businesses that won’t be taking on large amounts of debt that could impact your personal liability. Any partnership should be evidenced by a written partnership agreement setting forth the rights and obligations of each partner.
Corporation and Limited Liability Company
Both a corporation and limited liability company are businesses that are incorporated by filing articles of organization with the State of Florida. Both structures result in the creation of a separate legal entity, and as such the owners are given limited liability and may not be held personally liable for the obligations of the company. Because of the complex nature of these structures, it is essential to have an attorney take care of the legal details of incorporation to ensure that the owners are properly protected. The Federal government allows LLC’s and corporations to choose how they want to be taxed. The main differences between and LLC and a corporation in Florida has to do with the number of permissible members and whether a foreign national can be a member or shareholder or not.
Non-profit Organization
An NPO is a company that is formed to serve a specific service, which may be related to charity, education or scientific endeavors, that is exempt from paying income tax to the state due to the benefit the organization provides to society. As such, owners of the company do not benefit from the profits made by the organization but instead these profits are pushed back into the company to be used to further their goals. To start an NPO a statement of purpose must be established and articles must be filed with the state and IRS to apply for tax-exemption status.