Florida is one of the most business-friendly states in the country, and it's no wonder why. With its attractive economy and industries, it's a great place for small businesses to set up shop. But what makes Florida so attractive to small businesses?The limited liability company (LLC) model is increasingly becoming the preferred structure for small and medium-sized enterprises. This is because LLCs offer a “best of both worlds” approach, combining attractive company and corporate features.
LLCs are simplified and optimized to make them accessible to small businesses that don't have large budgets for corporate lawyers. Plus, LLCs offer limited liability protection to their members, meaning that a member's liability for business debts or other obligations cannot exceed the individual member's participation in the LLC. Corporations also have limited liability protection, but general partnerships and sole proprietorships don't. This means that if one partner accumulates large debts in the course of a partnership, even without the knowledge of the other partner, the second partner is legally liable for the debts, and his personal assets may be seized by the company's creditors. This is not the case with an LLC. Another great advantage of LLCs is what is known as “transferred taxes.” Instead of the company itself paying income taxes and filing a separate return, the company's profits “pass and are taxed on members' individual returns according to their respective interests, as in the case of a company.” This simplifies the tax preparation process and avoids “double taxation,” in which a corporation pays taxes on its profits and then shareholders return to paying taxes on their portions. One of the goals behind the LLC structure is to enable new businesses by reducing some of the barriers to starting.
With this in mind, LLCs require far less paperwork in start-up and during ongoing operations than corporations. The concept of a limited liability company was originally developed with small businesses in mind, but today even medium and large companies are choosing to organize as an LLC. Banks, insurance companies, and some professional entities, for example, are generally not allowed to organize as LLCs. LLCs are owned by their members (as opposed to shareholders who own corporations) and can be managed by members as a group or by a designated manager, who can, but does not have to be a member. An LLC can have several members or only one, and the structure allows for great flexibility in deciding how ownership interests and decision-making authority are allocated among members. In Florida, LLCs are managed by members by default, but members can choose to be managed by the manager.
Florida law assumes that all members of an LLC have authority to take routine action on behalf of the company, and a majority vote is required for anything outside of normal operations. Therefore, by default, any member can sign an LLC in a binding contract related to day operations, but a majority vote would be required to liquidate all or most of the company's assets, for example. However, members can vote to limit or expand the authority of individual members or of a manager. The primary governance document of an LLC is its “Florida operating agreement” - basically a constitution for the company. The flexibility inherent in the LLC structure largely stems from the ability to adapt an operating agreement to the specific objectives and nature of the business.
Operating agreements address structural issues such as how ownership interests and voting rights are allocated, how a manager is chosen (if applicable), and how ownership interests can be acquired or transferred. In addition, operating agreements can also address procedural issues such as how decisions are made within the company, who can make binding contracts on behalf of the LLC, and what happens when members can't agree on something. An operating agreement could establish a protocol for when a member dies or wants to leave the company - although these issues are usually covered in a separate Florida purchase agreement between members. Florida is generally considered one of the most business-friendly states in the U. S., due to its comparatively less intrusive regulatory climate and lack of state income tax or Florida inheritance tax. Federal income taxes still apply - as do other state taxes such as sales tax - but an LLC doesn't have to pay any income tax to the state of Florida regardless of whether you choose to pay taxes as a corporation or not. Another important point is that Florida LLCs are used for a variety of purposes including Florida pre-Medicaid planning LLCs, Florida asset protection LLCs, and LLCs for holding Florida real estate investments.
By reducing transaction costs and paperwork and increasing flexibility, Florida's Limited Liability Company framework makes it easier for small business owners in Florida to take advantage of all that this great state has to offer. An experienced Florida business law attorney can advise you on whether an LLC structure is right for your business and assist you in setting up your new business.
