To start a business in Florida, you’ll need to choose a business name and decide on your company structure. There are several types of business entities, including sole proprietorships, limited liability companies (LLCs), limited liability partnerships (LLPs) and corporations.
A sole proprietorship is an unincorporated business that has just one owner. Unlike corporations, sole proprietorship income is taxed as the owner’s personal income. If you decide on a sole proprietorship, you will be personally responsible for your business debts and obligations as the business owner. If you operate in Florida, there is no Florida income tax, but you would be required to collect sales tax if applicable.
Freelance and gig workers often start as sole proprietorships and then later upgrade to an LLC once business profits warrant the expense of setting up an LLC.
Limited Liability Company (LLC)
Unlike a sole proprietorship, an LLC is a separate legal entity with one or more owners or members. When you form an LLC, creditors cannot legally go after your personal assets as long as those assets were secured by the LLC instead of by you personally. Should your LLC ever go bankrupt, your personal assets are shielded from liability from creditors and employees. An LLC can choose to be taxed as a sole proprietorship, partnership or corporation.
There are many ways to start an LLC in Florida. The best LLC services handle all the details of business formation for you, including obtaining a federal employer identification number (EIN) and filing legal documents required by the state of Florida to establish your business.
Limited Liability Partnership (LLP)
An LLP is similar to an LLC because it offers owner partners legal protections. In Florida, however, LLPs are still personally liable for the debts of the partnership. The LLP provides each partner protection from other partners’ liabilities. LLPs are commonly used by those who provide professional services, including architects, attorneys and accountants. While some states do not offer LLPs, Florida does.
LLPs are pass-through tax entities, with the partners paying income tax on the company’s profits on their personal tax returns.
Starting a corporation is similar to forming an LLC, though the structure of a corporation is different. As with LLCs, corporations are separate legal entities that protect owners’ personal assets, but corporations also have shareholders, directors and officers. Corporations are subject to other requirements, such as holding regular shareholder meetings and maintaining corporate records.
An S corporation (S-corp) is a type of corporation that offers certain tax advantages to those who qualify for S-corp status. Larger organizations that want to issue more than one class of stock or depend on attracting venture capital are usually incorporated as C corporations (C-corps).