Forming a limited liability company (LLC) in Florida cultivates the benefits you seek in protecting your personal assets, gaining potential tax advantages and maximizing the credibility the "LLC" abbreviation lends to your business name. But as with any legal business structure, LLCs have their advantages and disadvantages.
Advantages of Forming an LLC in Florida
The Sunshine State carries potential for small business owners seeking asset protection. A Florida LLC combines the liability protection of a corporation with the tax treatment and ease of administration of a partnership.
Forming an LLC in Florida also offers:
- Pass-through taxation. LLCs typically enjoy pass-through taxation where the members (owners) report their share of the LLC's profit or loss on their individual tax returns. Any tax due is then paid at the individual level. Multi-member LLCs file an informational (partnership) tax return for the LLC, while single-member LLCs report all income or loss on Schedule C. Pass-through taxation sidesteps the double taxation incurred by C corporations when income is taxed at the corporate level and again at the individual level if corporate profits are distributed as dividends to owners (shareholders).
- Flexibility. LLCs generally have no restrictions on the number of members allowed, and members have flexibility in structuring management of the company. Florida LLCs can also select varying types of distribution of profits. Unlike a common partnership where the split is 50-50, an LLC has room for much more flexibility.
- Fewer formalities. The LLC business entity requires no corporate minutes or resolutions, making it easier to manage. Holding annual meetings of members and documenting major business decisions is still recommended, however.
- Subsidiaries. Unlike Florida S corporations, Florida LLCs are allowed to have subsidiaries without restriction.
Disadvantages of Forming an LLC in Florida
When considering forming an LLC in Florida, it's also important to look into its drawbacks.
Disadvantages of forming an LLC in Florida include:
- Initial and ongoing fees. LLCs are more expensive to form than sole proprietorships and general partnerships.
- Limited flexibility in ownership transfers. Ownership is typically harder to transfer than with a corporation. The members must outline in the LLC's operating agreement whether or not ownership can be transferred and if so whether approval of the other members is required.
- Minimal case law protection. There is not much case law in place because the LLC is a newer business structure.
To determine if a Florida LLC is the right path when you incorporate your business, consult with an attorney or accountant. You can also view the Florida LLC Formation and Florida Ongoing LLC Requirements information in our state guides.