Why are LLCs on the rise in Florida?

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LLCs on the rise in Florida

Forming a Limited Liability Company (LLC) comes with benefits such as protecting your personal assets and benefiting from possible tax advantages. It is therefore unsurprising that LLC registration in the state of Florida has increased over the years and businesses are seeking more opportunities for additional benefits. Many business owners are opting for LLCs instead of the traditional corporation as it comes with all the benefits of a corporation without the hassle of the Internal Revenue Service (IRS) and the state’s operational regulations. It is ideal for small to medium sized businesses or start-ups. Read more.

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Limiting liability

For a small business seeking asset protection, the state of Florida combines the limited liability of a corporation with the tax benefits of a sole-proprietorship. In its structure a LLC is very similar to a corporation although it is not. An LLC provides limited liability to it’s owners in various jurisdictions. It is also easier to set up than a corporation due to fewer regulations. The limited liability laws for Florida were rewritten in 2013 creating the Florida Revised Limited Liability Act (Chapter 605).

Limiting liability

Pass-through taxes

An LLC is a pass-through entity which means that income taxes pass through the LLC to its members. As the profits go directly to the members, there is no need for the LLC to file a corporate tax return. The members are taxed through their federal income tax returns and not at the company level which makes filing tax returns a lot easier. Pass-through taxation also means that the double taxation incurred by C corporations are being sidestepped. In other words, all profits are only taxed once. All losses must also be reported on personal income tax returns and will result in a reduction in overall tax liable to the state.

Flexibility

There is no restriction on the amount of members an LLC can have and the members also have a lot of flexibility when structuring the management of the LLC. You can either choose to have your company managed by appointed managers even if they are not members or your LLC can be managed by the owners. Also, in a common partnership the distribution of profit split is usually 50-50 or according to ownership percentage. However a Florida LLC is able to select various types of distribution profits making it more flexible than a traditional corporation. 

Fewer formalities

With more flexibility in the operation of the business, a Florida LLC also does not require corporate minutes to be taken. This makes the business easier to manage. It is however advised that major business decisions be documented and that an annual meeting is held for all its members.

Creditors claims protection for members

Limited liability means the amount of risk to incur for the owners. This essentially means that creditors won’t have claim to an owner’s or members of an LLC’s personal assets. This is also true in a C corporation. The LLC provides the owners full limited liability in every state. Think about it as a wall dividing your personal and business assets. Your business creditors can’t reach your personal side and vice versa. The LLC can lose every asset it owns, but the personal assets of the members / owners will still be intact.

Favorable business climate

Florida state has made it a priority to try and attract businesses. It has a rich culture and beautiful cities and its transport network is one of the best in the world. Businesses can also qualify for certain tax incentives and regular business expenses are generally less in Florida than in other states. The regulations are also easy to understand and the costs of obtaining permits are cheaper and easier to obtain than in most states. Some states also require a minimum of two members to register an LLC, but in Florida this is not the case. An LLC can be formed with only one member (owner).

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