The state of Florida provides new businesses with four classification options: Sole Proprietorship, Partnership, Corporation, or Limited Liability Company.
THE SIMPLEST OPTION:
Sole Proprietorships can be initiated without having to file any documents with state or federal authorities.
- A sole proprietor may choose to file a DBA (Doing Business as) to reserve the name they intend to use, and obtain an Employer Identification Number with the IRS.
- Fewer deductions may be taken on losses and business expenses than other business classifications.
- This type of business comes with a large exposure risk, as it does not limit personal liability.
Partnerships consist of two or more individuals engaging in a trade or business.
- All partnerships must be registered in the state of Florida, but simple partnerships do not limit personal liability for partners.
- Complex partnership structures are available when appropriate, such as limited partnerships or limited liability limited partnerships, which provide more liability protection for partners.
WHAT MOST PEOPLE THINK OF:
Corporations are highly organized, with executive officers, a board of directors, and shareholders.
- Executive officers are appointed by the board of directors, who in turn are appointed by shareholders, who own the company.
- Corporations limit the liability of both the executives and shareholders.
- Corporations are required to keep certain records and hold annual meetings, and the numerous formalities required of corporations make them a substandard choice in many cases.
THE IDEAL OPTION:
Limited liability companies provide limited liability coverage to owners and executives, and are more flexible than corporations.
- LLCs are governed by an operating agreement, similar in utility to a partnership agreement.
- LLCs are managed by either the manager or owner of the LLC, but can feature other executive positions as well.
- LLCs provide the structural benefits of corporations, without the formalities and rigidity.