When you are in the startup phases of launching a new business in Florida, you must make decisions that may have both immediate and long-term implications. One such decision is determining which business structure best fits your needs and goals. Choosing one structure over another, such as a corporation versus LLC, may have benefits or downsides — sometimes, both.
Research in advance is the key to making informed decisions regarding business structure. It’s helpful to discuss your ideas and goals with someone who is knowledgeable in state and federal business laws. Experienced guidance helps ensure that you are choosing the path that best protects your interests and maximizes your business potential.
Basic overview of a corporation and an LLC
A limited liability company (LLC) protects a business owner from personal responsibility for business liabilities. This type of business structure is similar in some ways to a corporation, but also has things in common with other structures like partnerships or sole proprietorship. In laymen’s terms, you are not personally financially responsible if someone sues your business. The LLC structure protects your personal assets.
Certain businesses cannot form an LLC, such as financial institutions and insurance agencies. Otherwise, any group or individual can register under this structure. A corporation is a business structure most often used when there are shareholders who own stock in a company. Shareholders have protection from liability against the company.
Differences between the 2 structures
A main difference between the two structures is that a corporation exists perpetually, meaning that, if the founder of the company dies, the business continues to exist. An LLC, on the other hand, typically lists a date of termination in its articles of organization. Another difference between these two structures is that corporations can buy and sell shares in the company. For those who wish to maintain complete control over company operations, however, an LLC might be a better option since corporations are more standardized and rigid in their operating structures.
If you own a corporation, you must adhere to recordkeeping requirements. There are also stringent rules regarding how you report and file taxes. In short, both structures provide liability protection for owners. An LLC involves much less business upkeep in a legal sense than a corporation.
You do not need to hire employees to become a corporation
Many Florida business owners mistakenly believe that they must first retain a specific number of employees before they can register as a corporation. This is not true. While corporations may hire employees, it is not a requirement of the structure. If you decide to change your business structure, you’ll want to make sure you understand all state and federal laws or requirements that may be applicable in your case.