The limited liability company (LLC) business structure has a rich history in the Sunshine State. After the first LLC was formed in 1977 in Wyoming, Florida was one of the early adopters. Still, in many respects, the LLC is a fairly new business structure. There are plenty of advantages for entrepreneurs who use this legal structure, which we explain below.
- LLCs offer protection for an owner’s personal assets. The “limited liability” component of LLCs is probably the most attractive aspect of the structure for business owners. This means that judgments and other losses against the LLC cannot be satisfied with the LLC member’s personal assets. Sole proprietors do not receive this benefit. However, malfeasance by LLC members can cause them to lose this protection in a move called piercing the veil.
- An LLC is less cumbersome to form and run than a traditional C-corporation. The amount of paperwork required to form a C-corporation overwhelms many startup founders. While LLC members must file articles of organization with the state and submit annual reports, startup obligations are much less than those for C-corporations. LLCs have no directors or board members to appoint. Boards must hold regular meetings and take “minutes” of each meeting. Changing most internal aspects of an LLC is simpler than the process associated with a C-corporation.
- Profits from an LLC are not taxed twice. The IRS taxes profits from a C-corporation at the business level and then at the individual level when shareholders report their personal income. This is intuitively referred to as “double taxation,” and LLC members may avoid it if they choose. Most LLC members choose this “pass-through” taxation treatment. Sole proprietorships offer pass-through taxation—but with none of the limited liability.
- LLCs offer stronger branding potential relative to sole proprietorships. Sure, sole proprietorships may choose a DBA (doing-business-as) name with which to conduct business. However, Florida LLC members choose an official business name that, once established, may not be used by other companies in the state. Having a recognized business name can help your business generate goodwill, which is a catch-all term for a company’s brand awareness and reputation. Furthermore, owning an LLC often makes your business more polished to potential clients.
Set Your Business Up Right
A sole proprietorship is right for many business owners who are content with low-risk side hustles. Forming an LLC is advantageous for ambitious entrepreneurs who want to expand and scale operations.
Whatever your business goals, we would be honored to help you achieve them. The Law Office of Ray Garcia, P.A. is committed to helping South Florida’s business community. Call our team at (305) 227-4030 for legal help getting your business off the ground.
Law Office of Ray Garcia, P.A.
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