Building a business is an exciting venture. However, it can be daunting. How do you know which path to take? What are the benefits of Florida’s various business structures? A business law attorney’s guidance can set you up for success.
Form Your Business
Choosing the correct business structure is a one of the most crucial things a business owner decides. This decision has very real effects on your business. It impacts taxes, legal protection, control of business affairs, and more. A business law attorney can assist with your decision.
The State of Florida has several business structures. Each one has its own benefits and drawbacks. A business law attorney understands every business is unique. They help you choose a business structure based on your specific business needs. Meet with a business law firm like Bitman O’Brien and Morat, PLLC to help you start.
When to Pick a Sole Proprietorship
This is the simplest form of business structure. In this structure, a single person owns the entire business. In a legal sense, you cannot distinguish the person from their business. In general, forming a business with this structure doesn’t require you to file or register any paperwork. However, it is still critical to consult with a business law attorney. They are your resource in correct and legal formation of your business.
This changes if the person wishes to conduct business under a fictitious name. The State of Florida requires them to register the fictitious name. This is a name that’s anything other than the business owner’s legal name. A business law attorney can assist with this process.
The key benefits of this type of structure rests in how simple it is. It allows a single person to engage in business actions without the need to engage in any legal steps. Also, it is not a separate entity under the law. All profits the business makes get taxed as income to the business owner.
There’s one major drawback to this business format. Under this model, as the business owner you are liable for any debt the business acquires. Also, you are liable for lawsuits filed against the business. In other words, if the business cannot pay its creditors, you have to pay the debts. If the business becomes the subject of a legal matter, you are liable. Walking away from the business doesn’t excuse you from this burden.
When to Start a General Partnership
A general partnership is the simplest form of business structure that involves more than one owner. Two or more people can build a general partnership when they come together to form a business venture.
The business partners may choose to enter into a partnership agreement that governs the nature of the business. However, it’s not required. In this case, Florida Statutes’ default provisions govern the partners’:
If you choose to enter into a partnership agreement, talk to your business law attorney. They can help you draft the necessary documents.
Also, the partners may wish to conduct business under a fictitious name. The State of Florida requires they register the name. This is a name that’s anything other than the personal legal names of the partners. Seek the help of a business law attorney with this process and if it applies to you.
All partners can decide on their own to bind the business. General partners have a financial duty to protect the interests of all partners. In a general partnership, all partners share in the company’s profits and losses.
General partnerships lack personal liability protection. This binds partners with the actions and decisions of their fellow partners. To a degree, general partners carry a greater personal risk.
The debts and lawsuits the business incurs could impact general partners. All general partners are liable to the same degree, in their personal capacity, for them. Each partner is on the hook for any of the partnership’s burdens. They are still liable even if they were not directly involved in the action or omission that caused the burden.
Why to Form a Limited Partnership
A limited partnership may be attractive for those who only want one role in the company. This structure allows one or more partners to invest money. However, these partners do not receive any control over company affairs.
There are two types of partners: general and limited. General partners have the right and duty to manage the business. They maintain general burden for the company’s debts.
Limited partners, or silent partners, have no power in the company’s daily affairs. In essence, they’re investors. However, they have one key benefit: personal liability protection. A limited partner’s burden cannot exceed their capital investment.
Before you form a limited partnership, meet with your business law attorney. You must register your business with the state. To form this business type, file a certificate of limited partnership with the Florida Department of State. Your business law firm can assist with the process.
When to Start a Limited Liability Partnership
Skilled service companies often choose this structure. These include:
- Accounting Firms
- Business Law Firms
- Law Firms
- Medical Groups
This structure limits what each partner is liable for. Each partner is liable for debts caused by their own actions and conduct. A partner isn’t liable for business debts from the other partners. All partners can manage the company without the fear of being on the hook for their fellow partners’ neglect.
A creditor may establish a lien against the partnership. The lien can be to the extent of that specific partner’s interest in the company. It doesn’t affect the interests of the other partners.
You must register the partnership with the state. File a qualification statement with the Florida Department of State. Work with a business law attorney to guide you as you build your business.
When to Form a Corporation
This is a legal entity that is separate and distinct from its owners. Stockholders own the business. Each stockholder owns a certain percentage. The number of shares of stock owned in relation to the overall shares decides the percentage. A corporate law attorney can help you build this type of business.
There can be any number of stockholders. They have a financial stake in the company. However, they don’t have direct control of over business affairs. A business’ officers and board of directors maintain control of affairs. A single person, by law, can be a stockholder, officer, and director.
In certain respects, the law treats these business types as people. This means corporations are able to:
- Enter Contracts
- Be Sued
- Own Assets
- Hire Employees
All actions occur in the name of the business itself. To learn more about how the law views this type of business, we recommend you consult a corporate lawyer.
The law’s view of this business structure creates benefits and drawbacks for the stockholders. Personal protection is the best benefit for stockholders. They aren’t liable on a personal level for any of business debts.
This business type may also qualify for tax benefits that other business types do not. With a corporate structure, it’s quite easy to transfer ownership of interest. Working with a corporate law attorney can aid in the transfer process.
All corporate earnings get taxed through the business. When a singular stockholder files their personal tax return, they get taxed for distributions they earned. This means the same income gets taxed twice.
Structuring as S-style corporate structure may help avoid double taxation. This allows for pass-through taxation. However, it may be subject to stock ownership restrictions or limits on certain tax benefits usable by C-style structures.
Each type of corporate business must engage in certain formal corporate actions. This includes holding board and stockholder meetings.
Working with a corporate law attorney can also help you understand the different corporate structures. into form a corporation in Florida, you must file articles of incorporation. File and register these with the Florida Department of State. A corporate lawyer is an essential asset for the process.
When to Start a Limited Liability Company
A limited liability company, or hybrid entity, combines features of the corporate structure and features of a partnership. It doesn’t have stockholders. These companies call their owners members. All members control over the company’s affairs unless they select otherwise. An operating agreement defines control of the limited liability company’s affairs. A business law attorney can help you draft this agreement.
Two features make these companies popular. The first is personal liability protection. This protection limits a member’s personal fault to the member’s capital investment. The next is pass-through taxation. These companies don’t file tax returns. Earnings get taxed through the personal tax returns of the members. This avoids double taxation.
We advise consulting with a business law firm as you build your company. You must register your company with the state. To form this type of partnership, file specific articles or organization with the Florida Department of State.
Choose Your Business Law Attorney in Florida
The lawyers at Bitman O’Brien & Morat, PLLC, assist business owners like you. We help you select best business structures for you. Our business and corporate lawyers provide critical insight as you build your business.
To learn more or to consult with one of our qualified attorneys, please call us at 407-815-3110. We provide business law attorney services throughout Florida. We have offices in Orlando, Miami, Tampa, and Fort Lauderdale. Our business law firm is here to help you establish your success.