Florida Business Entities (Basic Guide to Start a Business) Presented by: Law Offices

Basic organizational form in which its owner owns and operates the organization. No formal state filings needed and all profits are taxed as personal income.

Two or more persons carrying on a business as co- owners. Generally, no legal formation requirements-- not even a written partnership agreement. If there is no written agreement in effect, the state’s Uniformed Partnership Act (UPA) will control the partner’s relationship.

Partnership Characteristics Continuity: Each time a partner leaves (or a new one is admitted), the existing partnership is dissolved and a new one is created. The withdrawing partner is entitled to his/her share of the partnership assets. Termination can occur upon partner’s disability, death, or bankruptcy. Control: Unless agreed to otherwise, each partner has one vote and actions must be approved by majority vote. Liability: All partners are fully liable for partnership debts. Taxation: Partnership itself pays no taxes but individual partners report their income on their own personal tax returns.

Indemnity Clause

Limited liability partnerships are similar to LLCs but generally address special circumstances surrounding business associations among licensed professionals Such as attorneys, CPA’s, Doctors

Two classes of partners--limited and general. The limited partner merely contributes capital to the partnership. The limited partner has no right to participate in the decision making. The limited partner’s liability is limited to his/her initial investment. Usually a written agreement specifying the relationship between the partners is required as well as a filing with the states division of business entities.

An entity separate and distinct from its owners that does business under a charter provided by the state. It is generally advantageous if a business will have many factors of production and/or require large amounts of capital. Owners usually can transfer their shares freely

Corporation Characteristics Cost: Typically greater start up costs then partnerships or proprietorships because of excesses legal formalities of incorporation. Control: Depends on stock ownership division and voting rights. Liability: Limited liability and the individual shareholder’s liability is limited to the value of their investments. Taxation: Unless a Subchapter S, the corporation will pay taxes on any income it earns and shareholders must pay taxes on income distributed to them--- “Double Taxation”

Have the best characteristics of both partnerships and corporations. They are not double taxed like regular corporations but are limited in their ownership organization.

Limited Liability Companies have the liability advantages of corporations and tax advantages of partnerships, but are generally not subject to the same size restrictions as Subchapter S corporations. They are made up of members. LLC’s can have managers running the operation Which can be members or non-members

The Corporate Veil Corporations & LLCs enjoy a suit of armor or “corporate veil” to avoid personal liability by the shareholders or owners. However, this protection can be lost if the company is committing crimes, fraud, disregard of corporate formalities and form, or undercapitalized. Don’t forget Insurance For all entities!

Available to all entities “Doing Business As”– d/b/a– lasts for five years Under Fla. Law and can be renewed.

Review of the basic State filing forms State business entity forms can be found at: – –

Additional Forms Local County/Municipal Licenses: Don’t forget professional license (CPA’s, Doctors) Issued by the State via various administrative agencies—see department of business and professional regulation. INS Form: –I-9 (verify US legal residency) IRS Forms: –SS-4 (FEI or EIN number) –2553 (election for a s-corporation) –W-4 (employee tax form)

Let’s Not Forget

Presented by: Stephen C. Muffler, Esquire (954) Law Offices

Guaranty Clause