Pros and Cons of a Florida LLC for Aspiring Small Business Owners

Pros and Cons of a Florida LLC for Aspiring Small Business Owners

A Florida LLC is a business entity that combines the benefit of strong liability protection of a corporation with the simplicity, flexibility, and tax-related advantages of a partnership. However, like all other business structures, the LLC has pros and cons that you should be aware of before deciding whether or not this type of entity is the best one for your new company.

Here is a list of the main advantages and disadvantages of the Florida LLC structure:

Pros of a Florida LLC

It is Relatively Easy to Set Up

Compared to corporations, Florida LLCs are relatively simple to set up and operate. The paperwork is far less complicated, the process much less complex, and you are not required to maintain minutes of meeting or record resolutions.

Pass-Through Taxation

Unless you specify otherwise, LLCs are what is known as “pass-through” entities, meaning that all profits go directly to the members without being taxed as a company. Instead, the members of the LLC include this money on their individual federal income tax returns. Given that LLC profits are not considered earned income, they are not subject to self-employment taxation.

The same principle applies when the company loses money – all members can claim the loss on their individual tax returns and reduce their tax burdens. This pass-through taxation avoids the dilemma faced by C-corporations, where all profits are taxed first as business income and then taxed again as personal income taxes for each owner after the profits are distributed.

Management Flexibility

Unlike a corporation, a Florida LLC has no restrictions on the number of members it can have or the way the management structure is organized. In fact, Florida even allows the formation of LLCs with a single member, which some states do not. Additionally, a Florida LLC may also be owned by foreign individuals and corporate entities.

Under the Florida LLC Act, you can choose to have your company managed either by owners or designated managers who do not necessarily have to be members. This is usually more convenient if you and the other members of the LLC lack experience in successfully running a business.

Limited Liability

Perhaps the most important feature of Limited Liability Companies is included in its name: Limited Liability.

LLCs are similar to corporations because they shield the owners from personal liability for business debts. Unless you have specifically guaranteed company debts using your personal assets, your liability is limited to the amount of money you invested in the company. Assets separate from the business, such as cars, homes, personal bank accounts, and private investments will generally remain protected.

Cons of a Florida LLC

Although a Florida LLC might present several advantages, especially for small businesses, there are also some disadvantages that need to be considered, including:

Ownership is Not Easy to Transfer

There is limited flexibility in a Florida LLC when it comes to transferring ownership. Members must indicate early on in the operating agreement whether or not ownership can be transferred and, if so, whether the consent of the other members is required to allow the transfer. This requirement can make it a bit difficult for you to transfer your business interests to your family members, for example.

Limited Case Law

Since Florida LLCs are relatively new concepts compared to traditional partnerships and corporations, there is a limited legal precedent to base upon when disputes arise, which means that the outcome of cases involving LLCs is far less predictable compared to other business entities.

The One-Step Guide to Successfully Setting up a Florida LLC

Step One: Hire a Business Lawyer to Help You.

Although LLCs are highly popular among small business owners, setting up one is not free of complications and hidden dangers; this is why hiring an experienced Business Lawyer to assist you during formation of your new business must be at the top of your to-do list. Additionally, the help of a seasoned business lawyer who specializes in Florida LLC entities is crucial towards deciding whether a Limited Liability Company is, in fact, the right structure for your company.

At Jurado & Farshchian, P.L., we will be pleased to meet with you, review your unique business goals, and help you decide if a Florida LLC is right for you. Regardless of the business structure you end up choosing, we will remain by your side in every step of the way towards establishing and running a successful business.

To schedule an initial consultation with our Business Experts, you may call us at (305) 921-0440 or send us an email to Romy@jflawfirm.com.

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