Forming an LLC in Florida encourages the benefits you are looking for in protecting your personal assets. It helps you gain potential tax benefits and maximizes the credibility an LLC provides for your business name. However, as with a lot of legal business structures, LLCs have their benefits and downsides.
An LLC is easy and simple to form. The paperwork is less complicated and you’re not needed to maintain minutes or record solutions. You can, however, decide on the management structure, something that we will talk about here.
1. Pass-through taxations
Unless you say otherwise, LLCs are pass-through entities. It means that all profits go directly to members without being taxed at the company level. Instead, the members include this money on their personal federal income tax returns. Due to the fact that LLC profits are not seen as earned income, they are not liable to self-employment tax. In Florida State, these entities are also not taxed by the state.
The same rule applies if the company loses money, any members onboard can claim the loss on their personal tax returns to lower their tax burdens. This pass-through taxation bypasses the dilemma faced by C-corps where profits are taxed first as business income and again on the personal income taxes of each owner after distributions.
2. Business ownership and management structures
Unlike corporations, LLCs in Florida have no restrictions on the number of members’ structure. The state of Florida even allows the formation of single member LLCs where some states don’t. Those companies may also be owned by foreigners and corporate entities.
For individuals, it means that they do not need a team. A single person can choose to protect their freelance work or private practice by forming one. In that way, they can avoid freelance taxes, which are a lot of times, a burden on the taxpayer.
Under the Florida LLC Act, you can choose to have your business managed by owners or designated managers. These designated managers do not have to be members. The latter arrangement is more convenient if you and other owners lack experience in running a business. You can also specialize in other processes where you can grow, such as manufacturing or communications. The rest of the other owners and managers can handle the grunt work.
3. Liability protection
LLCs are similar to corporations in a sense that they protect you and any other owners from personal liability for business debts. Not unless you have guaranteed company debts using your personal assets, your liability is limited to the amount you have invested in the company. Items and assets such as homes, cars, personal bank accounts, and private investments, are usually separate from the LLC. So these assets are generally protected.
LLCs typically have little to no restrictions on the number of members allowed. Members have flexibility in structuring management of the company though. Florida LLCs can also choose varying types of distribution of profits. Not like a common partnership where the split is usually half-half. An LLC usually have room for much more flexibility.
5. Fewer formalities
The LLC business entity needs no corporate minutes or resolutions. That makes it easier for LLC business owners to manage and handle. Holding annual meetings of members and documenting major business decisions is still recommended by a lot of business owners though.
Unlike Florida S-corps, Florida LLCs are allowed to have subsidiaries without restrictions. Some states don’t even offer such subsidiaries due to reasons that are their own.
If you are a business owner in Florida and wish to form an LLC upon reading this post, I would highly recommend you to reach out to the nearest LLC agent today!