If you are thinking about starting a business in Florida, it is important to understand the distinctions among the different types of business structures.
Also, it’s important to learn more about how a limited liability company, or LLC, may be able to benefit you.
There are many different types of small businesses and companies in Florida, and those entities use several different types of business structures.
There are pros and cons to each type of business structure, and it is important to work with a Florida business law attorney to better determine which type of business is best suited to your needs.
At BrewerLong, we are committed to helping business owners in Florida with a wide variety of business law matters. We want to say more about the benefits of an LLC in Florida.
What is an LLC?
In order to understand the benefits of an LLC, it is important to understand what this business structure is and why it is used. As the U.S. Small Business Administration (SBA) explains, an LLC has some elements of both corporations and partnerships.
One of the reasons that many people choose an LLC when starting a business is that, in this type of business structure, owners are not personally liable when an LLC files for bankruptcy or faces a lawsuit.
To be clear, the business owner’s personal assets, including bank accounts, house, and other assets, are not at risk because the LLC is at risk.
Flexibility of LLCs in Florida
In Florida, LLCs are relatively easy to set up under the Florida Revised Limited Liability Company Act, and Florida law does not place any restrictions on the number of members in the LLC. To be sure, a single person can form an LLC in Florida, which is not true in all states.
Flexibility of LLCs in Florida also allows business owners to choose whether to manage the business themselves or to hire managers who are not owners of the business.
Another Benefit of LLCs is that they are “pass-through entities,” which means that all business owners receive profits from the business without the profits facing business taxes. Then, anyone who receives profits from the LLC includes those profits on a personal income tax return.
Yet claiming these profits on a personal income tax return is still favorable to the person receiving the profits because those profits are not classified as earned income. Accordingly, the LLC member does not have to pay self-employment tax on those profits.
Personal Asset Protection
One of the most important benefits of an LLC is the personal asset protection we mentioned above. One or more people can form an LLC in Florida to start a small business without being concerned about whether their personal assets are subject to liability.
However, it is important to make clear that asset protection for single-member LLCs may be limited in Florida due to a relatively recent Florida Supreme Court case. In Shaun Olmstead, et. al v. Federal Trade Commission (2010), the Florida Supreme Court ruled that single-member LLCs only are entitled to limited personal asset protection.
In that case, the court determined that Florida law “permits a court to order a judgment debtor to surrender all right, title, and interest in the debtor’s single-member limited liability company to satisfy an outstanding judgment.” The case suggests that multiple-member LLCs are not subject to the same limited asset protection.
Discuss Your Options with a Florida Business Formation Lawyer
If you are thinking about starting a business and have questions about whether an LLC is right for you, you should speak with a Florida business formation attorney as soon as you can.
An advocate at our firm can discuss the benefits of an LLC with you and can help you to learn more about the business structure that is best for your needs. Contact BrewerLong for more information.