LLCs are business structures in the United States that are formed in order to protect the personal assets of their owners. These companies are formed as separate entities and allow owners to utilize the characteristics of a corporation but are more flexible in the way that it is taxed and managed. LLCs also utilize certain aspects of partnership or a sole proprietorship but provide more liability protection.
An LLC can even have its own assets and bank accounts. LLCs can sign leases, loan documents, and other types of contracts. Overall, an LLC can do whatever a single person can do because it is a legal and separate entity. On top of this LLC owners (known as members) are not personally liable for business debts and obligations.
Reasons to Form an LLC
Entrepreneurs often form LLCs in order to obtain the various benefits that come along with forming one.
Most business owners look into forming an LLC because of the liability protection it offers. When forming an LLC you limit your personal liability for any and all business debts. If your business were to be sued for any reason, your personal assets would be safe, and only the assets of the business would be at risk. This is because the personal assets of LLC owners cannot legally satisfy business debts.
Flexible Tax Management
When forming an LLC you have the opportunity to elect taxation. This means that LLCs can choose to be taxed in the same manner as a sole proprietor or partnership (depending on the number of members), as well as a corporation, or an S corp. This choice can be made in order to get the best tax advantages.
LLCs also have the opportunity to avoid double taxation which is something that a standard C corp needs to deal with. LLCs will always pay taxes directly on the profits that pass through to the owners. Not only does this allow LLCs to avoid double taxation, but also the corporate franchise tax.
If formed anonymously, through a registered agent, then an LLC can keep your business completely separate from your name. Forming anonymously does not change the method in which you operate or pay taxes, but it does keep your name out of the public eye, and your assets private. Specifically, forming anonymously will keep your holdings out of your personal name and keep them in the name of your business. By keeping your name hidden from the public record you can also add another layer of protection from lawsuits.
Instead of appearing as a single person or partnership operating under a business name, forming an LLC can give you an added layer of professionalism. Operating as an LLC gives your business a specific title, which can provide you the opportunity to raise capital or obtain business loans. If you do not have an LLC it may be impossible to obtain a business account, which would then prevent you from getting a loan. Forming as an LLC can also show high-profile customers that you are a serious business.
How to Form an LLC in Florida
Forming an LLC in Florida is simple. All you have to do is follow these 5 easy steps!
Choose a Location
The first step to forming an LLC is deciding where you want to form it in. Formation occurs per state, and most people choose their home state. There are various steps to forming an LLC in the state of Florida, but other popular states as well. These include Wyoming, New Mexico, Nevada, and Delaware, due to their lenient laws in terms of taxation.
Choose a Name
Requirements vary from state to state, but Florida has a few specific LLC name requirements.
- Must end with an LLC designator. This might include Limited Liability Company or Limited Company, or an abbreviation of one of these phrases.
- Must not be the same as any other LLC in the state.
- May be reserved for up to six months by filing an Application for Reservation of Name with the Florida Department of Licensing and Regulatory Affairs. You must also pay the $138.75 fee.
Choose a Registered Agent
When forming an LLC you must have a registered agent, This person is often called the statutory or resident agent, but it is one of the most essential parts of forming an LLC. This person’s role is to accept legal papers on behalf of the LLC.
The registered agent must have a physical street address that is registered in the state where the LLC exists. This means that they must also be available during business hours. The registered agent may be one of the members (owners), but many LLCs choose to hire out private companies.
Create an Operating Agreement
Although it is not required by law in the state of Florida, an LLC operating agreement is a great idea. The operating agreement is essentially a rulebook for how you should run your LLC. It outlines the rules and responsibilities of the different owners, as well as managers, and will dictate how the LLC should be run. In the event a situation arises, the operating agreement can help to preserve limited liability. If you do not have an operating agreement then your LLC will be governed according to the LLC laws in Florida.
Form the Articles of Organization
The Articles of Organization are required documents that should be filed with the Florida Department of Licensing and Regulatory Affairs. This is a one-time cost of $100.
In the articles of organization you should include:
- Name and address of the LLC’s registered agent
- The effective date of filing the Articles
- Signature and phone number of the LLC organizer
Who Should Start an LLC?
If you own a business and wish to keep your personal property safe from creditors or business lawsuits, an LLC is a great way to do that. In case of any business liability issues, an LLC protects you and your family. Whether you own a start-up or are looking to give a sole proprietorship a more professional look, an LLC can help you to do that.
If you are looking to form an LLC in Florida a trusted business lawyer can help. There is a lot of paperwork and deadlines, that makes it difficult to form an LLC on your own. Speak with a professional today to learn more about the LLC formation process.