When setting up a business, your options are usually limited to a sole proprietorship, a partnership, a corporation, or a limited liability company.

Corporations, limited liability companies (llc), partnerships and sole proprietorships are the most common forms of business entities. Other types of entities are available, however, they often have special purposes that don't apply in most circumstances. Corporations, llc's, partnerships, and sole proprietorships are entity types and are controlled by state law. How those entities are taxed is determined by federal, primarily, and by state law. The typical tax types that apply to most business fall into one of four caregories, C corporation, S corporation, partnership and sole proprietorship. Some entities can be taxed more ways than others. Limited liability companies can be taxed all four ways, whereas a corporation can be taxed as a C corporation or an S corporation. However, only S corporation tax status has restrictions as to who can be an owner of the company. Below are two charts with the key differences between the entity types and the tax types.

What is better a corporation or a limited liability company?

Corporate law and limited liability company laws are created by each state, so the laws may vary from state to state. The biggest fundamental differences between a Florida llc and a Florida corporation are the way they can be taxed and the filing fees required. In my opinion, a Florida llc is a better entity to form than a Florida corporation because of the flexibility in the way the llc can be taxed, and the lower ongoing costs associated with maintaining the llc.

How LLC’s and Corporations are Taxed.

A corporation can typically elect to be taxed one of two ways, as a C corporation or as an S corporation. A single member limited liability company is by default taxed as a sole proprietorship. This is often beneficial for someone that has been in business for a while and wants to continue to file their taxes the same as they have always been taxed, but is only looking to use the llc for protection from debts and liabilities of the business. The owner receives protection from the debts and liabilities of the corporation, without having to file a corporate tax return. The owner can also elect to have the llc taxed as an S corporation or as a C corporation. A multi-member llc is taxed as a partnership by default, but the owners may also elect to have the llc taxed as an S corporation or as a C corporation. This flexibility comes in handy when the owners of the llc do not qualify as owners of an S corporation.

Required Filing Fees of LLC’s and Corporations.

In Florida, corporations and llc’s are required to pay filing fees to the Division of Corporations for a number of reasons. The first filing fee is incurred with the filing of the corporation or llc. To form a Florida corporation, the required filing fee to the Division of Corporations is currently $70.00. To renew a Florida corporation, the annual filing fee is currently $150.00. To make any changes or amendments, the filing fee is $35.00. And, if the corporation is late in filing its annual report (also known as the Uniform Business Report) it must pay a late fee of $400.00, or if it is administratively dissolved for failing to file the annual report, then it must pay a reinstatement fee of $600.00. To from a Florida limited liability company, the required filing fee to the Division of Corporations is currently $125.00. To renew a Florida llc, the annual filing fee is currently $50.00. To make any changes or amendments, the filing fee is $25.00. And, if the llc is late in filing its annual report (also known as the Uniform Business Report) there is currently no late fee, or if it is administratively dissolved for failing to file the annual report, then it must pay a reinstatement fee of $125.00.

What is the difference in how Florida corporations and Florida llc’s operate?

In Florida, corporations and limited liability companies operate in very much the same way, however, a lot of the terminology is different. Owners of a corporation are referred to as shareholders and owners of an llc are referred to as members. The management of a corporation is comprised of directors and officers and the management of an llc is comprised of managers. Corporations use stock certificates and llc’s use membership certificates. Shareholders of a corporation receives shares in the corporation and members of an llc receive a membership or equity interest in the llc. Under Florida law, the owners of a limited liability company enjoy the same protections as the owners of a corporation. Florida Statute §608.701 states that “[i]n any case in which a party seeks to hold the members of a limited liability company personally responsible for the liabilities or alleged improper actions of the limited liability company, the court shall apply the case law which interprets the conditions and circumstances under which the corporate veil of a corporation may be pierced under the law of this state.”

What is a Florida LLC?

A Florida LLC is a limited liability company formed under Chapter 608 of the Florida Statutes. A limited liability company is a legal entity that can be formed for any lawful purpose, but remains subject to statutes and regulations regulating and controlling its business. A Florida limited liability company provides its owners with protection from debts and liabilities of the business or llc. An llc can be taxed as a sole proprietorship, partnership, C corporation or S corporation.

What is a Florida Corporation?

A Florida corporation is formed under Chapter 607 of the Florida Statutes. A Florida corporation is a legal entity that can be formed for any lawful purpose, but remains subject to statutes and regulations regulating and controlling its business. A Florida corporation provides its owners with protection from debts and liabilities of the business or corporation. A corporation can be taxed as a C corporation or S corporation.

What are the differences between S Corporations and C Corporations?

S corporation and C corporation refer to how an entity is taxed. Corporations, by default, are taxed as a C corporation. LLC’s may also elect to be taxed as a C corporation. A C corporation files a tax return and pays taxes on its net profits at a variable rate that currently ranges from 15% up to 38%, depending upon the income of the corporation. After the corporation taxes are paid the corporation or llc can then distribute the remaining profits or retain them in the compnay. If any of the profits are distributed, then the owner is liable for personal income taxes on the amount that is distributed to them personally. An S corporation is referred to as a “pass-through” entity, which allows the profits to flow through directly to the owners of the corporation or llc. The owners of a corporation or llc that is taxed as an S corporation report the net profits on their own personal tax return based on their percentage of the profits and their personal tax bracket. This avoids the corporate taxation (and the double taxation on the profits distributed to the owners) and is usually better for small businesses or businesses with a relatively few number of owners. S corporation status, however, can only be elected if there are 100 or fewer owners (this used to be 35, then 75, and is currently 100), and all of the owners of the corporation or llc are U.S. citizens or permanent residents for tax purposes.

What are the benefits of setting up a Florida corporation?

There are three primary benefits associated with incorporating: 1) limited liability from the debts and liabilities of the corporation; 2) tax benefits; and, 3) a separate identity from the owners (good for selling a business). Not all benefits are available to everyone and in some cases there are no additional benefits. In most cases, however, the owners enjoy a degree of protection from liabilities related to the business. Business owners are often times liable for the actions of their employees and agents. When a corporation is formed, the corporation becomes the owner of the business and therefore assumes those liabilities, protecting the owners of the corporation by shielding them from those liabilities. Debts and contracts incurred in the name of the corporation, are the corporations responsibility, not the responsibility of the owner of the corporation, unless he or she guarantees repayment of the debt or performance of the contract. Whether a shareholder enjoys any tax benefits will largely depend on the shareholders personal situation, the business of the corporation, as well as how it elects to be taxed, whether as a C corporation or an S corporation.

What are the benefits of setting up a Florida limited liability company?

There are three primary benefits associated with forming a Florida limited liability company: 1) limited liability from the debts and liabilities of the corporation; 2) tax benefits; and, 3) a separate identity from the owners (good for selling a business). Not all benefits are available to everyone and in some cases there are no additional benefits. In most cases, however, the owners enjoy a degree of protection from liabilities related to the business. Business owners are often times liable for the actions of their employees and agents. When a limited liability company is formed, the llc becomes the owner of the business and therefore assumes those liabilities, protecting the owners of the llc by shielding them from those liabilities. Debts and contracts incurred in the name of the llc, are the llc’s responsibility, not the responsibility of the owner of the llc, unless he or she guarantees repayment of the debt or performance of the contract. Whether a member enjoys any tax benefits will largely depend on the members personal situation, the business of the llc, as well as how it elects to be taxed, whether as a sole proprietorship, partnership, C corporation or an S corporation.

What information do I need to set up a Florida corporation or Florida limited liability company?

The information that is required to file articles of incorporation of articles of organization (llc) is very limited. However, properly forming the corporation or llc is much more involved than just filing articles with the state of Florida. To prepare the corporate or llc minutes, issue stock certificates or membership certificates, prepare the paperwork for the tax identification numbers, workers compensation exemptions, and prepare bylaws or an operating agreement, there is quite a bit more information needed. The basic information needed are: the names, and addresses of the owners, along with social security numbers, or passport/visa if a non-resident of the US, and their percentages of ownership; the names of the directors and officers, or managers if an llc; the name, phone number and a physical address for the corporation or llc; and, how many employees the company anticipates having over the next 12 months.

What is the difference between a corporation or llc and a business?

Corporations and llc’s are legal entities that are typically used for the purpose of owning and conducting business. A business is typically any commercial undertaking (i.e. construction company, accounting office, dentist’s office,etc...), for the purpose of making money. The corporation or llc is owned by shareholders and members, respectively. The corporation or llc owns the business, which is managed by the directors and officers of a corporation or by the managers of a limited liability company. Because the corporation or limited liability company is a separate legal entity from its owners, it must obtain all the necessary identification numbers and licenses that the corporation needs to properly operate each business it owns. Such identification numbers and licenses vary from business to business. Some corporations need a sales and use tax identification number because they sell or lease products, whereas other companies may not need that number. Some companies must obtain state or local licenses to operate a particular type of business, such as construction, mortgage lending, or painting.

What are the steps to setting up a Florida corporation?

A corporation is formed with the state upon filing articles of incorporation. Either before or after the corporation is formed, organizational minutes must be prepared authorizing certain actions to be taken by the corporation, such as obtaining the federal employer tax identification number (also referred to as the FEIN or EIN) with the IRS (equivalent of a social security number for an individual), opening bank accounts, issuing shares of stock, authorizing a corporation seal, etc.. The EIN allows the corporation to open it’s bank accounts, file taxes, and take care of all other paperwork of the corporation, such as the sales and use tax application, unemployment tax application, workers compensation exemptions, etc.... In addition to organizational minutes, the corporation must obtain a corporate book to maintain the corporate records, and a corporate seal, if desired. The corporation must also draft bylaws for the operation of the company.

What are the steps to setting up a Florida limited liability company?

A limited liability company is formed with the state upon filing articles of organization. Either before or after the llc is formed, organizational minutes must be prepared authorizing certain actions to be taken by the company, such as obtaining the federal employer tax identification number (also referred to as the FEIN or EIN) with the IRS (equivalent of a social security number for an individual), opening bank accounts, issuing shares of certificates, authorizing a company seal, etc.. The EIN allows the llc to open it’s bank accounts, file taxes, and take care of all other paperwork of the llc, such as the sales and use tax application, unemployment tax application, workers compensation exemptions, etc.... In addition to organizational minutes, the llc must obtain a company book to maintain the llc records, and a company seal, if desired. The llc must also draft an operating agreement for the operation of the company.

Why use an attorney to incorporate or form an llc?

An experienced attorney should be able to provide you with valuable advice regarding the filing needs of the company as well as help assist you in obtaining all the necessary identification numbers needed for the corporation or llc. The attorney should also be able to obtain a corporate book and seal and prepare the organizational minutes, bylaws or operating agreement, all at a reasonable price.

Do I need a new EIN if I incorporate or set up an llc?

Yes. Because the corporation or llc is a separate legal entity from its owners, the corporation or llc must have its own federeral tax id number (EIN). The old number can be closed out when the final tax return is filed for the old business entity.

How long does it take to incorporate or form an llc and when do I get my EIN?

Our office has streamlined the process of forming Florida corporations and Florida limited liability companies. Because we have an account with the Division of Corporations, we are able to get articles of incorporation or articles of organization filed the same day if we have all of the necessary information early enough in the day. Usually by 2:00 pm. Once the articles are filed we can usually obtain the EIN within a matter of 15-20 minutes. If requested early enough in the day, we are often able to get the EIN’s the same day the corporation or llc is requested. The total processing time to complete the corporation, corporate book, seal and all, is approximately 5-6 business days.

What is a registered agent and who acts as registered agent for my company?

A registered agent is a person or entity that can be served with a lawsuit in place of the corporation. Any person or entity, other than the corporation or llc itself, familiar with the Registered Agent duties, as set forth in Florida Statutes §607.0505 and §608.0 with a physical location in Florida can act as a registered agent of the corporation or llc.

What is a dba or fictitious name and how many can my corporation/llc have?

In Florida, a fictitious name (also known as “doing business as” or “d/b/a”) is a name that any individual, corporation, llc or other legal entity operates under other than their own name. Such names include corporate names where the “inc”, “corp”, “llc” or “co” is dropped from the end of the name. The filing fee is $50.00 and the name can be renewed every 5 years. IT IS EXTREMELY IMPORTANT THAT A FICTITIOUS NAME APPLICATION BE PROPERLY PREPARED AS TO NOT CAUSE PERSONAL LIABILITY TO SHIFT TO THE OWNERS OF THE CORPORATION OR LLC.

What is a trademark and a service mark?

A trademark or service mark is any word or logo or any combination thereof that help identify a businesses products or services. A trademark identifies products and a service mark identifies services. These marks receive a certain degree of protection under common law, however, if a mark is worth protecting, then it is important that the marks be registered with the U.S. Patent and Trademark Office (USPTO). Registration with the USPTO gives owners of the mark additional protections, including presumption as to the right to use the name, as well as attorneys fees and costs if you prevail in a claim against someone using your mark without your permission. The cost of filing a trademark or service mark through a qualified law firm generally runs between $1,000.00 and $1,500.00. If the mark is important, then hire an attorney that handles intellectual property law to make sure that the application is filed correctly. Otherwise, your mark may not be adequately protected.

What is a P.A. or PLLC?

P.A. and PLLC refer to a Professional Association and Professional Limited Liability Company, respectively. A professional association is nothing more than a type of corporation that limits who may be an owner of that corporation. A professional limited liability company is nothing more than a limited liability company that limits who may be an owner of the company. PA’s and PLLC’s can be formed by any individual that engages in a profession that is regulated by law, or group of individuals in a common profession.

How Many businesses can I set up under my Florida corporation or Florida llc.?

A corporation or limited liability is not restricted in the number of business that it may own and operate. The only restrictions, with respect to the number of businesses that may be owned, is based upon regulation of the various businesses. Certain regulated occupations, such as in the real estate industry, may be restricted from engaging in multiple overlapping types business under one corporation or llc.

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All florida corporations and Florida LLC's include: Consultation with an experienced business attorney, Preparation and filing of custom articles of incorporation or articles of organization, state filing fees, registered agent service until May of 2008, Padded Corporate book and slip cover, Corporate Seal, Instructions on the use and setup of the corporation of limited liability company, Obtaining the federal tax ID for the corporation or LLC, preparation of the applications for the state sales and use tax number, unemployment tax number, and workers' compensation exemptions, and providing the paperwork necessary to hire and report the hiring of employees.

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