To start a business in Florida, you will need to choose a business name and decide on your company structure. There are several types of business entities, including sole proprietorships, limited liability companies (LLCs), limited liability partnerships (LLPs), and corporations.
A sole proprietorship is an unincorporated business that has only one owner. Unlike corporations, sole proprietorship income is taxed as the owner’s personal income. If you decide on a sole proprietorship, you will be personally responsible for the debts and liabilities of your business as the business owner. If you operate in Florida, there is no Florida income tax, but you will be required to collect sales tax if applicable.
Freelancers and gigs often start as sole proprietorships and then upgrade to an LLC after the business profits warrant the expenses of forming an LLC.
Limited Liability Company (LLC)
Unlike a sole proprietorship, an LLC is a separate legal entity with one or more owners or members. When you create an LLC, creditors cannot legally go after your personal assets as long as those assets are secured by the LLC instead of you personally. If your LLC ever goes bankrupt, your personal assets are protected from liability by creditors and employees. An LLC can choose to be taxed as a sole proprietorship, partnership, or corporation.
There are many ways to start an LLC in Florida. The best LLC services handle all the details of business formation for you, including obtaining a federal Employer Identification Number (EIN) and filing the legal documents required by the state of Florida to establish your business.
Limited Liability Partnership (LLP)
An LLP is similar to an LLC in that it provides the owner partners with legal protection. In Florida, however, LLPs are still personally liable for partnership debts. The LLP provides each partner with protection from the liabilities of the other partners. LLPs are commonly used by those who provide professional services, including architects, lawyers and accountants. While some states do not offer LLPs, Florida does.
LLPs are pass-through tax entities, with partners paying income tax on the company’s profits on their personal tax returns.
Starting a corporation is similar to forming an LLC, although the structure of a corporation is different. As with LLCs, corporations are separate legal entities that protect the personal assets of the owners, but corporations also have shareholders, directors, and officers. Corporations are subject to other requirements, such as holding regular shareholder meetings and keeping corporate records.
An S corporation (S-corp) is a type of corporation that offers certain tax advantages to those who qualify for S-corp status. Larger organizations that want to issue more than one class of stock or depend on attracting venture capital are usually incorporated as C corporations (C-corps).