Legal Structure

When starting a business, you must decide what form of business entity to establish. Establishing a business structure is an important first step for obtaining required government permits and licenses. Your business entity determines the amount of regulatory paperwork you have to file, your personal liability regarding investments into your business, and the taxes you have to pay. It is recommended that you consult with an accountant or attorney when deciding on legal business structures, such as a sole proprietorship or a limited liability company.

 

 

 

Sole Proprietorship — A business owned and managed by one individual who is personally liable for all business debts and obligations

 

This is the simplest business entity to set-up and dissolve, and generally the least costly. However, sole proprietors have unlimited liability and are responsible for all business debts. No state filing is required for sole proprietorships; however, if you choose to assume a fictitious name for your business, then you must register with the Florida Secretary of State.

 

Partnership — Two or more people share ownership of a single business

 

Each partner contributes money, labor, and/or property; and each partner shares the profits and losses on their individual tax returns. Partnerships can be either general or limited. In a general partnership, at least one partner has unlimited liability. In a limited partnership, there are limits to the personal liability of each partner.

 

Corporation —  A legal entity owned by shareholders, also called a C Corporation

 

Corporations can provide their owners greater protection from personal liability. Articles of Incorporation must comply with the "Florida Business Corporation Act" (Chapter 607, Florida Statutes). Required fees and taxes must be paid. There are two main types of corporations: “C” corporations and “S” corporations. The C Corporation can be owned by an unlimited number of shareholders, either as individuals, partnerships, trusts or other corporations. As the legal entity, the corporation pays tax on net earnings, and the shareholders pay personal tax on dividends. Shareholders cannot deduct corporate losses from their personal returns.

 

S Corporation — A special type of corporation created through a tax election

 

The S Corporation provides the same protection from personal liability as the C Corporation, but it treats corporate profits as personal income, taxable to the individual shareholders. This avoids the double taxation that exists in the C Corporation. S Corporation election forms have to be filed with the U.S. Department of State.

 

Limited Liability Company (LLC) — LLC formation is a relatively new, hybrid-type of legal company structure

 

The limited liability company provides the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. The LLC formation Articles of Incorporation (LLC Chapter 608, Florida Statutes) must comply with the "Florida Limited Liability Company Act." 

 

Non-Profit — An organization engaged in activities of public or private interest that is not motivated by making a profit. Some non-profits are exempt from paying federal taxes. 

 

Cooperative — A business or organization owned by, and operated for the benefit of, those using its services. Cooperatives are not a legal structure.

Online Resources  Visit these resources to learn more about which type of business entity is right for you:   Guide to Choosing a Business Structure   The U.S. Small Business Administration provides this clear and concise guide covering the most popular business structures. Outlines the advantages and disadvantages of each type of business structure as well as tax requirements. Tax Information - Business Structures   The Internal Revenue Services provides information on the tax implications of the most common business structures. Business Registration in Florida If you decided to create a corporation, a non-profit, a limited liability company or a partnership (limited, or limited liability), you will have to register your business and file certain documents with the state government. If your business is a sole proprietorship, you do not need to register your business with the state.   Out-of-state corporations moving into Florida are considered foreign corporations and need to file incorporation documents to do business in Florida.   For business registration in Florida, you can file your incorporation documents electronically at: www.sunbiz.org

Fictitious Name Registration  The legal name of a business is the name of the person or entity that owns a business. Your business' legal name is required on all government forms and applications, including your application for employer tax IDs, licenses and permits. However, if you want to open a shop or sell your products under a different name (assumed name, trade name, or DBA name, short for "doing business as"), then you have to file a "fictitious name" registration form.   Business registration in Florida for all businesses operating under a fictitious name is with the Florida Department of State Division of Corporations. Fictitious name registration for a sole proprietorship or partnership does not protect the name from use by others. However, corporation names are protected when the Articles of Incorporation are filed.    Fictitious name registration is valid for five years. The fee for registering a fictitious name is $50. For information regarding fictitious names on file, you may search the Division's records online or call (850) 245-6058.    Online Fictitious Name Registration is available on the Department of State’s website:    Online Application    Business owners can also download the form.    Send completed application with appropriate fees to:   Fictitious Name Registration PO Box 1300 Tallahassee, FL 32302-1300 (850) 245-6058                        www.sunbiz.org