Owning a successful business in Florida is the lifetime dream of many entrepreneurs. One of the crucial factors to forecast whether a company will be successful is the owner’s accuracy when choosing a legal structure for the business.
In this article, you will find out how to identify a proper legal structure for your Florida business.
Business Legal Structures in Florida – The Basics
Under Florida law, there are several legal structures with different characteristics, which includes:
- Sole proprietorships
- General partnerships
- Limited liability partnerships
- Limited partnerships
- Limited liability limited partnerships
- Limited liability companies
- Family limited partnerships
- Subchapter C corporations
- Subchapter S corporations
- Professional service corporations / professional liability companies
How to Choose a Legal Structure for Your Business in Florida – In Detail
Assessing the Business’s Size and Number of Owners
The legal structure for a company must accommodate the size of the proposed business enterprise and the number of owners involved in the arrangement.
For instance, if the primary goal is to form a publicly-traded company, a corporation is the ideal business structure. Conversely, a family-based business with multiple co-owners would be better structured as a limited liability company (LLC) or a limited partnership.
LLCs are not subject to the same level of corporate formalities required of corporate entities with multiple shareholders, an extended board of directors, and a complex management structure.
As it is plain to see, it is crucial to consult with an expert business attorney to assess your goals and specific business plan to identify whether a certain legal structure is suitable for your case.
Identifying the Company’s Income Sources
The type of legal entity used to form a Florida company will depend on the activities carried out by the business and the methods used to generate capital.
Will the company rely on investors and funding rounds? Is the company interested in selling portions of ownership to raise capital for further investments? If that is the case, a corporate business is a right choice.
However, if the main goal is building a local company to sell standard goods or services, forming a limited liability company or a limited partnership may be a better option.
The viewpoint of an expert business attorney is essential to assess all the factors involved in the capitalization of the proposed business plan and how the company’s formation will affect it in the future.
Identifying the Costs and Expenses Associated with Each Business Structure
Choosing the right legal structure for a Florida business will not affect its future management and operation only. Besides, it will impact the costs and expenses to form, maintain, and evolve the company over time.
For instance, maintaining a corporate business is generally more challenging and costly than maintaining the operations of a limited liability company (LLC).
Besides the costs of the business itself, it is crucial to consider the taxation aspect. It is impossible to maintain a company active within US jurisdiction without paying the due taxes.
Choosing the wrong legal structure when forming a company may result not only in financial hazard but also hardship associated with tax compliances. Conversely, choosing the right legal structure may result in tax advantages and cost-effective solutions for a company.
Before filing the paperwork with Florida’s Department of State, entrepreneurs must consult with an expert attorney and a CPA to anticipate all costs and tax liabilities associated with each type of business structure.