According to the Small Business Administration, over 2.8 million small businesses are in Florida. If you want to start your own business, you know that choosing the correct business formation is an important first step. The business structure you select will influence your operations, finances and even your personal liability.
In Florida, several business formation options are available to entrepreneurs, and each comes with its own advantages and disadvantages. Understanding your options can make a significant difference in your business’s success and longevity.
Sole proprietorship
A sole proprietorship is the simplest form of business structure. As the owner, you run the business and are responsible for all its assets and liabilities. While easy to set up, this option leaves you personally liable for all business debts and obligations.
Partnership
A partnership is a business formed by two or more people. There are two types of partnerships in Florida: general partnerships and limited partnerships. In a GP, partners share equal rights and responsibilities in managing the business. In an LP, one partner has unlimited liability, while the other partners have limited liability and limited control over the company.
Corporation
A corporation is a more complex business structure. It is an independent legal entity owned by shareholders, meaning the corporation itself, not the shareholders, is legally liable for the actions and debts the business incurs. Corporations require more extensive record-keeping, operational processes and reporting. There are two types of corporations: S-Corporation and C-Corporation. The primary difference between the two relates to how the government taxes them.
Limited liability company
A limited liability company combines features of both corporations and partnerships. An LLC protects you from personal liability in most instances. Your personal assets, like your vehicle, house and savings accounts, will not be at risk if your LLC faces bankruptcy or lawsuits.
Nonprofit organization
A nonprofit organization is a business formed for charitable, educational, religious, literary or scientific purposes. These organizations are eligible for tax-exempt status, meaning they do not pay state or federal taxes on any profits it makes.
Selecting the appropriate business formation requires careful consideration of many factors. By choosing the right business structure, you can ensure a solid foundation for your business in Florida.