Limited Liability Companies, or LLCs, can offer many benefits to an entrepreneur. The primary benefit for many business leaders is the protection offered by a LLC. A LLC is a form of business entity that acts as a type of shield, protecting the business owners from personal liability associated with the company.
Whether beginning a business or considering switching an existing partnership to a LLC, the following information can help you determine if a LLC is right for your company.
Some Pros and Cons of Forming an LLC
A LLC offers a balance of flexibility and limited personal liability that can serve well for many types of businesses. A LLC is not required to have annual meetings or a board of directors, requirements often present with corporations.
Business owners are also allowed to create flexibility within their operating agreements. If structured correctly, the LLC can offer this flexibility while still shielding owners and shareholders from personal liability.
An additional benefit to a LLC is the ability to choose which type of taxation works best for your particular business. Owners can choose between taxation as a sole proprietorship, partnership, S corporation or corporation.
Steps to Forming a LLC in Florida
When forming a LLC there are some basic steps to follow. The first step involves choosing a name. This may seem like an easy task, but in addition to the pressures of finding a creative and catchy title for the company, it is also important to make sure the name is not already in use by another business.
This can be done by checking a chosen name with a few sources, including:
- Basic search engine search – simply type the chosen name into a favorite search engine and see what comes up
- Basic search engine search – simply type the chosen name into a favorite search engine and see what comes up
- State’s filing office
- A search of the United States Patent and Trademark Office’s database
Taking the time to find a unique name will pay off in the long run. From experience and observation, expert patent lawyers Thompson Patent Law says that if a business name is chosen that is already in use, allegations of trademark infringement can negatively impact the business.
After deciding on a name, prepare and file articles of organization with Florida’s Department of State, Division of Corporations. These documents are fairly short but serve like a constitution for the business. Information within these documents often includes the company’s name, address, purpose, members, organizers and management structure.
Although not legally required by the state, it is recommended that a business next execute an operating agreement. This agreement can cover a broad range of content, including how meetings will be conducted, how the company will be managed and what capital contributions each member is required to make. As mentioned above, this document can play an integral role in the way a business functions.
Next, contact the county or city clerk’s office along with the local chamber of commerce to determine what, if any, local licenses are required to run the business. After this is completed, apply for an Employer Identification Number (EIN) from the IRS. This number is important for tax purposes, since businesses may be required to pay additional federal, state and local taxes.
Finally, it is a good idea to open a bank account for the business. This is an easy way to keep the business’s finances separated from personal accounts.
In addition, one year after the date of organization LLCs in Florida must file an annual report with the Division of Corporations. This report must be filed on an annual basis.
The Need for Professional Guidance
While forming a LLC can be as easy as downloading fill in the blank forms, taking this route can lead to headaches in the future. There are many federal and state legal requirements during the formation process that, if not done correctly, can lead to financial penalties or dissolution of the business. In order to avoid this and better ensure that the LLC is incorporated to meet the needs of the business, it is best to seek the counsel of an experienced corporate attorney.
The Florida Department of State can require dissolution of a LLC for various reasons. For example, Florida law requires that LLCs appoint and maintain an agent for service of process. This agent must file a written statement with the Florida Department of State. If this is not done promptly the Department of State may dissolve the business. The Department of State may also dissolve the business if it does not file the annual report on time.
In addition, because of the increased flexibility inherent to a LLC, it is important to carefully structure the operating agreement. If an operating agreement does not properly outline how the business will be governed, problems could arise in the future.
This is especially true if multiple members are involved. Each member is responsible to the LLC for any business decisions, but also has the right to control the business. This can lead to difficulties if all members are not clear about the goals and direction of the business.
It is also important to be aware of the significance tied to choosing the form of taxation best suited to the LLC. In some cases, if a LLC is incorporated improperly it can be required to pay federal taxes – something often avoided when structured properly.
Being aware of these and other requirements can help a business to avoid dissolution and penalties in the future. As a result, if considering forming a LLC it is wise to seek the counsel of an experienced Florida corporate attorney. This professional will not only help to ensure that the business complies with federal and state laws but also that your business interests are protected.
