Business Planning

Different Types of Business Entities in Florida

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So, you want to start a business? There are many choices to choose from. What entity best suits you? Your options include:

  • The Florida Corporation (which include S corporations, C Corporations, Non-Profit Corporations or Professional Corporations) 
  • The Sole Proprietorship 
  • The Florida Partnership (or a type thereof) 
  • The Florida Limited Liability Company 

The C Corporation 

In Florida, when a company is incorporated, it is considered a C Corporation. This is the most complex of them all. If no other election is made, the company will always be classified as a C Corporation.   

The Florida Business Corporation Act (“FBCA”) governs corporations (other than not-for-profit corporations). Under the FBCA, a corporation must meet certain requirements and strictly observe certain formalities such as:

  • A corporation may be organized for any lawful purpose, 
  • have the same powers as an individual to carry out its business,
  • Ownership of a corporation must be represented by shares and is vested in its shareholders.
  • A corporation must be formed by filing articles of incorporation with the State.
  • At a minimum, the Articles must contain the following: name of the corporation, street address of the principal place of business, corporate purpose, details on the corporation’s stock structure, registered agent, and names and addresses of incorporators.
  • Regarding the stock structure, your articles of incorporation must state the following: if there is only one class of stock, the articles of incorporation must state the number of shares authorized; or if there is more than one class of stock, the articles must provide a designation for each class and specify the number of shares, preferences, limitations and rights for that class.
  • An incorporator is required to sign the articles. A Director and a designated agent for service of process must be identified. 
  • A corporation must have a board of directors to exercise corporate authority and bylaws to govern the board.
  • Annual meetings of shareholders and directors are required.
  • The name of a Florida corporation must include the words “corporation,” “incorporated” or “company,” or the abbreviations “corp.,” “inc.” or “co.”
  • And the list goes on, if you are interested in forming a C Corporation, contact our team at the Horton Law Group, P.A.

As you can see, there are many formal requirements to comply with when forming a C Corporation. If you are considering it, please contact the Horton Law Group, P.A. to schedule a free consultation with a qualified member of our team. 

In order to achieve the benefits of the corporation, you want to make sure your corporate structure is sound. 

The No. 1 benefit of a C Corporation is limited liability protection. Although Corporations have many other benefits, including tax benefits and the ability to easily transfer shares from one owner to another. A corporation can have different types of stock, called classes or series. These types of stocks can have different advantages, for example, one can offer voting rights while another may not.  

If you are considering forming a Corporation, please contact a qualified member of our team. We are committed to staying ahead of the curve as Florida corporate law is constantly changing. Our practice will continue to be at the forefront of evolving business and corporate law as new legal questions emerge. We can help you establish a strong foundation for your business by ensuring that you are properly incorporated, and we can draft and set up all of your internal corporate books and documentation and serve as your corporate counsel so we can provide you with important deadlines and updates in the law. 

At the Horton Law Group, we treat our clients like family. We are actively involved in the community, and we are well respected in the courtroom. We maintain professional relationships with our corporate clients long after their cases are resolved because we continue to serve as their corporate counsel providing them with change in the law updates so they too can stay ahead of the curve. We are confident that you will be happy with your decision to hire the Horton Law Group to represent all of your business needs. Please contact the Horton Law Group, P.A. at 561-299-0018 or email legalsupport@hortonlawgroup.com to schedule a free 30-minute consultation with a qualified member from our team.

Once you are incorporated, our team at the Horton Law Group can prepare you corporate books, which include your bylaws, 

  • Bylaws are a corporation’s internal roadmap for the way it will be governed and the operating procedures it will follow. Bylaws can include any provisions for managing the affairs and regulating the business of the corporation.
  • Stock Certificates 
  • Organizational Meeting Minutes 
  • Annual Meeting Minutes 
  • Required Notices 
  • Shareholder Agreements 
  • Employment Agreements 
  • Non-Disclosure Agreements 
  • Non-Compete and Non-Solicitation Agreements 
  • Dissolution documents 
  • Asset Protection Documents 
  • Estate Planning Documents 

One of the downsides to the C Corp is the double taxation scheme. A C corporation is a separated identity then its shareholders. This means that the corporation is taxed on its profits and then the shareholders are taxes on the dividends they are issue by the corporation (double taxation). A Corporation pays taxes on its net earnings at corporate rates. Salaries of officers, directors, and employees are taxable to them and deductible to the corporation. However, money paid out in dividends is taxed twice. It is taxed at the corporation’s rate as part of its profit, and then at the individual stockholders’ rates as income, when distributed by the corporation to them.

The S Corporation – also known as “The Sub Section S Corporation”

The S Corporation is one of the most popular business entities in the State of Florida. 

  • You must incorporate and file Articles and comply with all of the requirements as discussed in the C Corp Articles as seen above. 
  • Rather than being double taxed, you make an S Corp election or complete IRS Form 2553 and you will receive the benefit of pass-through taxation while retaining all of the other benefits of the Corporate status. 
  • You retain the protection of limited liability 
  • You must strictly comply with the annual requirements of the corporation (holding meetings and recording minutes). 
  • You are limited to 75 members 

If you are considering forming a S-Corporation, please contact a qualified member of our team. We are committed to staying ahead of the curve as Florida corporate law is constantly changing. Our practice will continue to be at the forefront of evolving business and corporate law as new legal questions emerge. We can help you establish a strong foundation for your business by ensuring that you are properly incorporated, and we can draft and set up all of your internal corporate books and documentation and serve as your corporate counsel so we can provide you with important deadlines and updates in the law. 

At the Horton Law Group, we treat our clients like family. We are actively involved in the community, and we are well respected in the courtroom. We maintain professional relationships with our corporate clients long after their cases are resolved because we continue to serve as their corporate counsel providing them with change in the law updates so they too can stay ahead of the curve. We are confident that you will be happy with your decision to hire the Horton Law Group to represent all of your business needs. Please contact the Horton Law Group, P.A. at 561-299-0018 or email legalsupport@hortonlawgroup.com to schedule a free 30-minute consultation with a qualified member from our team.

Limited Liability may not be so Limited

Piercing the Corporate Veil 

Historically, the primary advantage that a corporation offered was limited liability. Whereas the owners of sole proprietorships and general partnerships are directly liable for business debts, a corporation’s shareholders have no direct liability, except to the extent of the consideration they have contributed or agreed to contribute in exchange for stock in the corporation. (F.S. 607.0622). Limited partnerships traditionally provided limited partners this same protection from liability, but left the general partner exposed. The LLC expanded the availability of limited liability to all owners of the business.

Liability protection is not as complete as it may seem. A corporation’s officers, directors, and employees may be personally liable to the corporation or to third parties for any torts they commit in the course of their duties. (F.S. 607.0831). Under principles of agency law, officers, directors, and employees may also be personally liable for the debts of the corporation, unless they unambiguously indicate that they are signing obligations in a representative rather than individual capacity. In addition, trade creditors, lenders, and landlords often require the owners of a small company to personally guarantee the business’s obligations.

When properly organized and operated, a corporation will offer its owners limited liability; however, Courts will “pierce the corporate veil” and disregard the corporation’s liability shield in the event the owners are found to have themselves disregarded the corporate form. In the egregious (and easy) cases, an owner makes personal use of the corporation’s assets. For example, by living rent-free in a corporate-owned residence or paying personal expenses by corporate check. 

However, when the corporation’s owners fail to observe the corporate formalities (e.g., operating without a board of directors, violating the corporation’s articles of incorporation or bylaws, failing to hold annual meetings), the corporate liability shield may also be pierced.

Florida corporate law is complex. It is highly advised that you consult with a corporate attorney if you have been threatened with a lawsuit and/or been served with a lawsuit. Once you are served, you only have 20 days to file a responsive pleading. The type of responsive pleading you file can make all of the difference.  They are many defenses, that if not initially raised, are forever barred. At the Horton Law Group, we provide our clients with solid legal strategy, and we are fierce in the courtroom. Please contact the Horton Law Group, P.A. at 561-299-0018 or email legalsupport@hortonlawgroup.com to schedule a free 30-minute consultation with a qualified member from our team.

Sole Proprietorship

A sole proprietorship is arguably the simplest form of conducting business, as it does not require the formation of a separate entity under state law. Florida law allows you to use your own name in running a sole proprietorship, which means an individual may conduct business without using an artificial entity. The downside is there is NO limited liability. So, we do NOT recommend it. But, in the event you choose to do so, all you need to do is choose a name, register it with the state and you are required to advertise the business, at least once, in a local newspaper in the county where the sole proprietorship has its principal place of business. (Fla. Stat. § 50.011).

A license or permit must be obtained to run certain businesses. All of the licenses necessary to conduct the business are obtained in the individual’s name. Although this simplicity may be an advantage in and of itself, the disadvantages of operating a business as a sole proprietor are numerous and significant. Foremost among these negatives is the exposure of the sole proprietor to personal liability for the debts of the business. 

If you plan on hiring employees, you MUST obtain an EIN for tax purposes. All businesses with employees are required to report wages to the IRS using their EIN and pay employment taxes on a periodic basis. In Florida, businesses are also required to file new-hire reports and register for an unemployment compensation account.

Even though you are taking the simple approach with a sole proprietorship, all business should have their own separate bank accounts (commingling personal assets with corporate assets is NEVER recommended). Insurance is also recommended. If you have more than 4 employees, workers compensation insurance is required. It is always a good idea to have personal contents, renters’ insurance, professional liability and malpractice insurance.  

Lastly, there is a cost to doing business in Florida. All entities formed or doing business in Florida must file annual reports and pay annual fees to the State. (Fla. Stat. § 608.4511). 

If you are considering forming a business, please contact a qualified member of our team. We are committed to staying ahead of the curve as Florida corporate law is constantly changing. Our practice will continue to be at the forefront of evolving business and corporate law as new legal questions emerge. We can help you establish a strong foundation for your business by ensuring that you are properly incorporated, and we can draft and set up all of your internal corporate books and documentation and serve as your corporate counsel so we can provide you with important deadlines and updates in the law. 

At the Horton Law Group, we treat our clients like family. We are actively involved in the community, and we are well respected in the courtroom. We maintain professional relationships with our corporate clients long after their cases are resolved because we continue to serve as their corporate counsel providing them with change in the law updates so they too can stay ahead of the curve. We are confident that you will be happy with your decision to hire the Horton Law Group to represent all of your business needs. Please contact the Horton Law Group, P.A. at 561-299-0018 or email legalsupport@hortonlawgroup.com to schedule a free 30-minute consultation with a qualified member from our team.

The Partnership

A partnership is exactly how it sounds; two or more persons (individuals or artificial entities) entering into a partnership under Florida law for one common business purpose – to make money. Strangely enough, there is no requirement that there be any written agreement to form a partnership although it is an extremely bad idea to start a business with someone and not have the basic structure of how the business will be operated agreed to and in writing. There are also no formal filing requirements to form a partnership, we highly recommend the following: 

  • Choose a name 
  • Lock down logos, copyrights, patents or trademarks or tradenames 
  • Create a partnership agreement 
  • Apply for all required licenses (city county, state)
  • Apply for an EIN 
  • Open a business bank account 
  • Talk to an insurance agent about obtaining the appropriate insurance 
  • Contact the Horton Law Group to keep you out of trouble

The four types of partnerships recognized under Florida law are: 

(i) general partnerships, 

(ii) limited partnerships, 

(iii) limited liability partnerships, and

(iv) limited liability limited partnerships.

All of which will be discussed below.

The Limited Partnership  

A limited partnership is like a general partnership BUT it has to types of partners: a general partner and a limited partner. The general partner manages the business and assumes personal liability for all claims and debts of the business (unlimited liability), while the limited partner is usually a silent investor who is not personally liable and who does not manage the business. The limited partner’s liability is limited to the amount of their investment. 

Limited Partnerships are treated like general partnerships for tax purposes, meaning the partners reports and pay taxes on their share of the profits on their individual returns each year. Lastly, Florida limited partnerships have perpetual duration. There is a lot of controversy with this new law as judgment creditors of a limited partnership cannot foreclose on the underlying partnership assets, rather they are only entitled to a charging lien. 

If you are considering forming a Florida limited partnership, please contact a qualified member of our team. We are committed to staying ahead of the curve as Florida corporate law is constantly changing. Our practice will continue to be at the forefront of evolving business and corporate law as new legal questions emerge. We can help you establish a strong foundation for your business by ensuring that you are properly incorporated, and we can draft and set up all of your internal corporate books and documentation and serve as your corporate counsel so we can provide you with important deadlines and updates in the law. 

At the Horton Law Group, we treat our clients like family. We are actively involved in the community, and we are well respected in the courtroom. We maintain professional relationships with our corporate clients long after their cases are resolved because we continue to serve as their corporate counsel providing them with change in the law updates so they too can stay ahead of the curve. We are confident that you will be happy with your decision to hire the Horton Law Group to represent all of your business needs. Please contact the Horton Law Group, P.A. at 561-299-0018 or email legalsupport@hortonlawgroup.com to schedule a free 30-minute consultation with a qualified member from our team.

The General Partnership

A general partnership is a legal entity owned by two or more persons. Each owner is a general partner who owns a general partnership interest in the partnership. This is the most basic, most informal, partnership set up available in the State of Florida. Each and every general partner is liable for 100% of the debt of the partnership and 100% of the actions of the other partners.  PARTNERS BEWARE!

A general partnership may also be formed without filing any formation documentation with the Florida Department of State. This means that the administrative costs of having a general partnership are relatively low, but the potential liability costs can obliterate any administrative savings as seen by the liability exposure as mentioned above. 

The Florida Revised Uniform Partnership Act of 1995 (“FRUPA”) governs general partnerships and limited liability partnerships FRUPA whether registered or not. So, it is a good idea to understand the requirements and duties thereof or even better…it is a great idea to retain corporate counsel who can make sure that you understand the intricate working of FRUPA and that you are in compliance therewith. 

If you are considering forming a general partnership, please contact a qualified member of our team. We are committed to staying ahead of the curve as Florida corporate law is constantly changing. Our practice will continue to be at the forefront of evolving business and corporate law as new legal questions emerge. We can help you establish a strong foundation for your business by ensuring that you are properly incorporated, and we can draft and set up all of your internal corporate books and documentation and serve as your corporate counsel so we can provide you with important deadlines and updates in the law. 

At the Horton Law Group, we treat our clients like family. We are actively involved in the community, and we are well respected in the courtroom. We maintain professional relationships with our corporate clients long after their cases are resolved because we continue to serve as their corporate counsel providing them with change in the law updates so they too can stay ahead of the curve. We are confident that you will be happy with your decision to hire the Horton Law Group to represent all of your business needs. Please contact the Horton Law Group, P.A. at 561-299-0018 or email legalsupport@hortonlawgroup.com to schedule a free 30-minute consultation with a qualified member from our team.

The Limited liability Company (LLC) 

A limited liability company is an entity distinct from its members, for any lawful purpose, regardless of whether the company is a for-profit company – for indefinite duration. (Fla. Sta. § 605.0108(1)(2)(3)). Why choose the LLC? It combines the limited liability protection of a corporation with the beneficial pass-through tax treatment and ease of administrative requirements of a partnership. There is much more flexibility in management and organization with fewer formalities. To incorporate you need to file articles of organization with the State. (Fla. Sta. § 605.0201(1)).

The articles of organization must state the following:

 (a) The name of the limited liability company, which must comply with s. 605.0112. 

 (b) The street and mailing addresses of the company’s principal office; 

 (c) The name, street address in this state, and written acceptance of the company’s initial registered agent. (Fla. Sta. § 605.0201(2)(a)(b)(c)). 

A limited liability company is formed when the company’s articles of organization become effective under s. 605.0207 and when at least one person becomes a member at the time the articles of organization become effective. By signing the articles of organization, the person who signs the articles of organization affirms that the company has or will have at least one member as of the time the articles of organization become effective. (Fla. Sta. § 605.0201(4)).

On the flip side, there is a cost to do business as an LLC in the State of Florida. There are annual fees owed to the state. Members of the LLC should also retain counsel to prepare the internal documents of the entity, including the drafting of the operating agreement – which is essential to how the LLC should be operated and owned and transferred in the event of dispute, death or dissolution.

To determine if the LLC is the right choice for you, call the Horton Law Group today. We are committed to staying ahead of the curve as Florida corporate law is constantly changing. Our practice will continue to be at the forefront of evolving business and corporate law as new legal questions emerge. We can help you establish a strong foundation for your business by ensuring that you are properly incorporated, and we can draft and set up all of your internal corporate books and documentation and serve as your corporate counsel so we can provide you with important deadlines and updates in the law. 

At the Horton Law Group, we treat our clients like family. We are actively involved in the community, and we are well respected in the courtroom. We maintain professional relationships with our corporate clients long after their cases are resolved because we continue to serve as their corporate counsel providing them with change in the law updates so they too can stay ahead of the curve. We are confident that you will be happy with your decision to hire the Horton Law Group to represent all of your business needs. Please contact the Horton Law Group, P.A. at 561-299-0018 or email legalsupport@hortonlawgroup.com to schedule a free 30-minute consultation with a qualified member from our team.

 

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