Picking the appropriate structure for your business in Florida is essential, as it can save you the trouble of having to reclassify your business in the future. Many business owners narrow down their choice to a Florida LLC versus an S corp. Both of these entities have many similarities but a few key differences, and understanding these differences can help you make a final decision. Hiring a Fort Lauderdale business formation attorney is also helpful when making your decision, as your attorney can go over your business plan and give you specific advice on the type of entity that will work best for your needs.
What do Florida LLCs and S Corps have in common?
Both LLCs and S corps have limited liability for the business owners in regards to business debts. Both of them must be filed with the State of Florida. Both of them are pass through entities, meaning that the profit or loss of the business is passed through to the owners’ personal tax returns. This type of taxation is also used for sole proprietorships as well as partnerships. Pass through entities face only one level of taxation, and that is one main reason why the S corps and LLCs are popular business structures.
How are Florida LLCs and S Corps different?
LLCs in general have fewer obligations for operation compared to an S Corp. They have fewer forms required for registration, but they must file annual reports. LLCs are aslso not the perfect entity for every type of business. They have a limited life; for example when the owner(s) declare bankruptcy, become disabled, or pass away, the LLC is usually dissolved. LLCs are not expected to last more than 30 years in most states including Florida. Another issue is that LLCs cannot issue stock, while S corporations can.
S corporations offer some unique benefits
S corporations are a separate entity from the shareholders which allows the business to have a separate life from the shareholders. This means that if shareholders die or withdraw from the company, the business can continue without being dissolved. There are clearer lines between the shareholders and the company with this structure. However, S corporations are required to have annual shareholder and director meetings, regularly updated by-laws, and a host of other obligations that are not required for LLCs. Unlike LLCs, S corps can issue stock, which may be very important for a particular business.
To learn more about the differences between LLCs and S corps in Florida or to ask questions about which particular business entity will work best for you, contact Mark Schecter, a leading Fort Lauderdale business formation attorney for advice at (954) 779-7009.