Whether your passion is consulting, building homes, dog-walking or finance, it can be tempting to operate as a sole-proprietorship. Forming an LLC brings benefits such as asset protection, lower taxes, privacy and professionalism. These advantages are not available to those who don't form companies.
After all, there is no paperwork to file, no extra bank account and you handle everything in your name. This method, however, brings many disadvantages. You pay more in taxes, enjoy no privacy and everything you own is potentially at risk. Potential clients may also not take you as seriously if you don't form a Corporation or LLC.
Fortunately, we make forming a Florida LLC easy. We handle all your filings with Sunbiz and ensure it is done correctly the first time. We also provide numerous resource articles to assist with operating your company and enjoy the company's benefits.
Benefits of an LLC
There are many benefits that LLCs provide both individuals and businesses. Here are some of the most common reasons people choose an LLC:
Limited Liability
Similar to corporations, LLCs provide limited liability for its owners by creating legal separation between the business and the owner. In comparison, with a Sole-Proprietorship or partnership, the owner and business are legally the same, so any business debts incurred are also personal debts.
An LLC offers protection for the owner’s personal assets, so that they cannot be used to collect on any business debts or lawsuits. Only the company's assets will be at risk if done correctly, not your personal home, checking account or other assets. With corporate structuring, you can also minimize the risk to your personal assets, e.g. through forming a holding company.
LLC Taxes
LLCs lack a federal tax classification, so are classified as either disregarded entities or partnerships by default, depending on the number of owners it has. As a result, LLCs can take advantage of pass-through taxation and avoid the dreaded double taxation Corporations experience.
Whereas, corporations are taxed twice on shareholder distributions (both at a corporate level and individual level), LLCs are not, as they do not have to pay corporate taxes. Instead, the income and expenses of the LLC “pass through” the personal tax returns of the owners. Alternatively, an LLC can be taxed as a Corporation or S-Corporation.
The new federal tax laws also bring additional benefits to business owners. These were designed to encourage small business formations and can represent significant savings. These tax savings along more than justify the effort of forming and maintaining your company. Find our page here about Florida LLC taxes.
Single Member LLC
The owners of a limited liability company are called members. So, a single member LLC is a company that has one owner. Florida allows one member companies, but they do face certain disadvantages for asset protection. While a SMLLC is better than a sole-proprietorship, some choose to add a 5% partner to avoid being a single member limited liability company.
LLC Operating Agreement
An operating agreement is a contract that acts to ensure the rights and responsibilities of members and managers are understood. It provides the framework for what is expected of each party, and records ownership percentages for owners. This is referred to as a membership interest in the company.
Flexibility
LLCs offer several methods of flexibility in terms of leadership and structure. For example, LLCs do not have the ownership restrictions that corporations have. There is no restriction on the number of owners allowed for LLCs. Additionally, corporations operate under a fixed management structure where operations are overseen by officers and a board of directors.
LLCs, on the other hand, have considerably more freedom to structure their business and make decisions. There is also flexibility available in terms of profit distributions. Corporations are required to distribute profits according to the number of shares a shareholder has and the type of share it is. LLCs, however, can distribute profits to its owners in whichever manner they have decided.
Anonymous Florida LLC
If privacy and protection of your personal information is a priority to you, an LLC can help you achieve this. Depending on which state you form your LLC, there are different methods for achieving anonymity. Some states do not require that you disclose managers or members of your LLC. In this case, protecting your information is much easier. This is one of the many advantages a New Mexico LLC offers.
For states that do require this disclosure, one method available to you is a Double LLC. For example, if you want to achieve an anonymous LLC in Florida, you can form an anonymous LLC in New Mexico and list it as the owner of your Florida LLC. Then, when someone researches your Florida company it leads them back to an anonymous LLC. The New Mexico LLC can also act as a holding company.
Forming Your Florida LLC
When forming your Florida LLC, hiring a professional formation service is a smart way to ensure it is done correctly and hassle-free. In order to form your LLC correctly and maintain good-standing, be aware of the following necessary steps:
- Choose a name for your LLC that is unique from other Florida companies. The name must include an “LLC”, “LC”, or similar qualifying abbreviation.
- File your Articles of Organization with the Florida Division of Corporations.
- Appoint a registered agent for your LLC that can receive legal documents on your entity’s behalf and maintain regular business hours at a physical address in Florida.
- If your LLC contains two or more members, you must obtain an Employer Identification Number from the IRS for tax purposes.
- Create an operating agreement if your LLC has more than one member. While not an official requirement, it is smart practice to have one in place and it is recognized by Florida as a governing document.
- Open a bank account to separate business and personal assets.
- Comply with all state regulations and tax requirements.
- File annual reports on time to avoid penalties and maintain your good standing.
If you would like assistance with any of these steps or with the entire formation process, enlist the help of our LLC formation service. Our expertise and experience can help ensure that your LLC complies with all state requirements, while protecting your personal information.