If you are thinking of starting a business in the Sunshine State, you might be wondering if a Florida corporation is the right choice for you. The answer to that question depends on your goals, needs, and circumstances.
Although a corporation can offer many benefits, it also comes with some drawbacks. Below is what you need to know.
What is a Corporation?
A corporation is a type of business entity that:
- Is a separate legal entity from its owners, called shareholders;
- Can sue and be sued, enter into contracts, own property, and conduct business in its own name;
- Has perpetual existence, meaning it can continue to operate even if its owners change or die;
- Is managed by a board of directors, who are elected by the shareholders and oversee the major decisions of the corporation.
- Issues shares of stock to its owners, who have limited liability for the debts and obligations of the corporation.
- Is subject to state and federal taxes on its income, and may also pay dividends to its shareholders, who are taxed on their personal income.
How to Form a Corporation in Florida
To form a corporation in the State of Florida, you need to follow these steps:
- Choose a unique and distinguishable name for your corporation that includes the word “corporation”, “company”, “incorporated”, or an abbreviation thereof.
- Appoint at least one director who is at least 18 years old and not a resident of Florida.
- File articles of incorporation with the Florida Department of State. The articles of incorporation must include the following information:
- The name and address of the corporation
- The name and address of the registered agent who will receive legal notices on behalf of the corporation
- The number of shares that the corporation is authorized to issue and their par value
- The name and address of each incorporator
- The purpose of the corporation
- The effective date of the incorporation
- Obtain an employer identification number (EIN) from the Internal Revenue Service (IRS) for tax purposes.
- Hold an organizational meeting to elect directors, appoint officers, issue shares, and conduct other business.
- Adopt bylaws that govern the internal affairs of the corporation, such as the roles and responsibilities of the directors, officers, and shareholders.
- Register with the Florida Department of Revenue and pay any applicable taxes and fees.
- Obtain any licenses or permits that are required for your type of business.
Pros and Cons of Starting a Corporation in Florida
Forming a corporation in Florida can offer many advantages, such as:
- Limited liability: As a shareholder of a corporation, you are not personally liable for the debts and obligations of the business. This means that your personal assets are protected from creditors or lawsuits against the corporation.
- Tax advantages: A corporation can deduct many business expenses from its taxable income and even choose to be taxed as an S corporation, which avoids double taxation by passing through its income and losses to its shareholders.
- Credibility: A corporation can enhance your business image, and therefore, attract more investors, customers, suppliers, and partners who prefer to deal with a formal and established entity.
- Perpetual existence: A corporation can continue to exist even if its owners change or die. This provides stability and continuity for your business operations.
However, forming a corporation also has some disadvantages that you should consider, such as:
- Complex laws and regulations: A corporation must comply with many state and federal laws and regulations that govern its formation, management, taxation, reporting, etc.
- Higher costs: A corporation has higher start-up and ongoing costs than other types of business entities. For example, you need to pay filing fees, legal fees, and accounting fees to form and maintain your corporation. You also need to pay state corporate income tax on your taxable income.
- Double taxation: Unless you elect to be taxed as an S corporation (which has certain eligibility requirements), your corporation will be subject to double taxation. This means that your corporate income will be taxed twice: once at the corporate level and again at the personal level when you receive dividends from the corporation.
Do You Want to Form a Florida Corporation? We Can Help You
If you are interested in forming a corporation in the Sunshine State, you need the guidance and assistance of qualified and experienced business attorneys.
At Jurado & Associates, P.A., we can help you with every aspect of incorporation, from choosing a name and filing articles of incorporation to drafting bylaws and issuing shares. We have the knowledge and expertise to help you make the best decisions for your business.
We are ready to help you turn your business dreams into reality.