Why should I form my Corporation or LLC with Florida Biz Formation™?

We are entrepreneurs ourselves. We know what it’s like to start a new company and how important it is to have it set up exactly right. We have a trained staff to answer your questions and concerns and put your mind at ease.

Why should I form a Limited Liability Company (LLC) or a Corporation?

When setting up your new business it’s important to keep your personal identity separate from your business. This minimizes the likelihood of your personal assets being affected by your business debts or legal proceedings. Having a Corporation or LLC makes it easier to raise capital, realize tax advantages and ownership can be anonymous.

What is necessary to form a LLC or Corporation?

Before getting started with our easy online forms, you will Need to know what kind of entity you want to form and the name of your Company. Florida Biz Formation™ will guide you along during the easy online process.

What is a Corporation?

A corporation is a legal entity that is separate and distinct. It is its own “person”; it can open a bank account, own property and conduct business under its own name. The main advantage of a corporation is that its owners (known as stockholders or shareholders) are not personally liable for the debts/liabilities of the corporation. Let’s say your corporation gets sued and it has to file bankruptcy, then the owners are not required to pay the debt with their own personal money. If the corporation’s assets are not enough to cover the debts, the creditors can’t go after the stockholders, directors or officers of the corporation to recover the unpaid debts.

A major disadvantage of a corporation is double taxation. A traditional corporation is known as a C-corporation. This type of corporation pays a corporate tax on its corporate income, this is the first tax. Then, when the C-corporation distributes profits to the stockholders, the stockholders then pay income tax on those dividends which is the second tax.

A way to avoid this double taxation is to elect a special tax status with the IRS so that the corporation will taxed as a pass-through entity (like a partnership or a sole proprietorship). By doing this, there is only one level of taxation. This is called an S Corporation. Here, the corporate profits "pass through" to the stockholders who then pay taxes on the profits at their individual tax rates.

What is the structure of a Corporation?

A corporation is owned by stockholders. As a stockholder, you may serve on the Board of Directors and you may also be an officer of the corporation. In Florida, a corporation may be formed by one person and that one person can be the only officer, director and shareholder. For larger corporations, stockholders usually will not directly manage the affairs, however, they can influence and affect corporate decisions by electing and removing directors and approving or disapproving amendments to the Articles of Incorporation. The Board of Directors are responsible for managing the affairs of the corporation. The Directors generally make the major business decisions. They also supervise and appoint officers who handle the day to day affairs. Officers, handling the day to day business affairs are generally appointed by the Board of Directors.

What is an S Corporation?

The main advantage of having an S Corporation is avoidance of double taxation. This can be done by electing a special tax status with the IRS. Having this tax status permits the income of the corporation to be "passed through" to the shareholders. The shareholders report the income or loss which is generated by their S Corporation on their individual tax returns. The form required for this election is Form 2553 and is filed with the Internal Revenue Service (IRS). In addition, to qualify for this status, each stockholder must be a citizen or resident of the United States, estate or qualifying trust of such person. They can only have one class of stock, they must not have more than 100 stockholders and each must consent. They corporation must also use the calendar year as its fiscal year. If the corporation can demonstrate to the IRS that another fiscal year satisfies a business purpose then sometimes they will permit a different fiscal year.

What is a Limited Liability Company?

Just like a corporation, an LLC is a separate and distinct legal entity. The LLC can obtain a tax ID number, open a bank account and conduct business, all under its own name. The main advantage of an LLC is that its owners (known as members) are not personally liable for the debts and liabilities of the LLC. Let’s say your LLC gets sued and it has to file bankruptcy, then the owners are not required to pay the debt with their own personal money. If the LLC’s assets are not enough to cover the debts, the creditors can’t go after the officers, members or managers for recovery of the debt. For taxes, an LLC may be taxed either as a "pass-through" entity where the profits pass-through to the owners and the owners pay taxes at their individual tax rates or as a regular corporation.

What are the differences between an LLC and S Corporation?

An LLC and an S-corporation share many tax characteristics. The LLC does have more flexibility and less restrictions than an S-corporation.

S-corporations have stricter formalities such as the requirement to hold an annual meeting of stockholders. S-corporations cannot issue more than one class of share and they cannot have more than 100 stockholders. Owners of an LLC are required to pay medicare taxes and social security on the profits of an LLC. A corporation’s stockholders are not required to pay these taxes on profits over and above the stockholder's salary.

What is a Registered Agent?

Your LLC or Corporation is required to have a registered agent. This is the person designated to receive official state correspondence and notice if the corporation is "served" with a lawsuit. The registered agent must be an adult living in the state of Florida with a street address (P.O. boxes are not permitted) or a company with a business office in Florida which provides registered agent services. They also must have normal business hours.

How do I know what type of entity to form and what are the differences between all the different entities?

Florida Biz Formation™ is a service company. We do not give financial or legal advise. We invite you to take a look at our Comparison Chart so that you can see the differences of each entity.