Choosing a Legal Structure

Choose your legal structure carefully. It will determine what kind of taxes you'll pay, who's liable financially and legally and what forms to file

Barbara Miracle | 6/1/2006

Sole Proprietorship
Sole proprietorships are easy to set up and easy to disband. Profits are taxed at the owner's individual federal tax rate, with the amount reported on Schedule C or Schedule CZ. Sole proprietorships do not file Florida corporate income tax returns, but owners have unlimited personal liability for any debts or other obligations the business incurs. In Florida, that liability is limited by the state's homestead rights laws, preventing creditors from seizing an owner's home.

Partnership
Partnerships can be formed as easily as sole proprietorships. These unincorporated businesses allow two or more people to share liability and provide capital. Business income is reported on partners' individual tax returns. A partnership can't be dissolved on a whim, so be careful if you enter into one. Limited partnerships must file with the Florida Department of State, Division of Corporations and pay $35 to designate a registered agent and $965 in filing fees for new partnerships; $500 annually.

Limited Liability Company
Limited liability companies, or LLCs as they are known, are a hybrid form of business that combines elements of partnerships and corporations. In Florida, LLCs may elect whether to be taxed as partnerships or corporations. (The Internal Revenue Service allows LLCs to choose whether to be taxed on the federal level as partnerships or corporations, also.) LLCs must file with the Florida Department of State, Division of Corporations ($125 for new LLCs; $50 annually).

Corporation
Corporations are separate legal entities that must be incorporated with the Florida Department of State, Division of Corporations.

The two types of corporations are the C-Corporation and the S-Corporation. With a C-Corporation, the corporation rather than individuals pays taxes and assumes liabilities. Florida's corporate tax is 5.5%.

An S-Corporation allows up to 75 shareholders to share income and expenses and to report them on their individual income tax returns.

In 2005, there were 168,182 new for-profit businesses registered with the Florida Division of Corporations.

Also, 130,558 new limited liability companies and 5,377 partnerships filed documents. In total, Florida had 869,198 registered for-profit corporations.

Resources

IRS Tax Topic
408, Sole Proprietorship
irs.gov/taxtopics/tc408.html
IRS Publication 541, Partnerships
irs.gov/pub/irs-pdf/p541.pdf
IRS Publication 542, Corporations
irs.gov/pub/irs-pdf/p542.pdf
Florida Division of Corporations
sunbiz.org

Tags: Florida Small Business, Business Services

Florida hospitals: Building boom

Florida student aid requests plunge. How many will delay or skip college?

Florida insurance market full of ‘low quality' companies, study finds

Commercial rent tax cut coming sooner than expected

Try It ^{- Free Downloads}

Do I Have What It Takes? Entrepreneurial Assessment Industry Assessment Market Analysis: Customers Market Analysis: Competitors Compare Your Business to Others in Florida Securing a Loan Checklist Financial Analysis: Start-Up Expenses Financial Analysis: Ongoing Expenses

Florida Business News

Pandemic put a hurt on Florida sports programs
Fewer fans during the COVID-19 pandemic resulted in a drop in economic returns on state programs that provide sports-related grants and incentives, according to a newly released state analysis.
Surge in Haitian migrants hasn’t hit Florida shores, so far. What happened?
The predictions were dire: Florida was on the verge of experiencing an onslaught of refugees from Haiti. A month later, it turns out there hasn’t been a noticeable change in Haitians arriving in Florida. There isn’t agreement about why.
Florida's 2024 constitutional amendments: What voters need to know
As Florida voters start thinking about November, they shouldn't forget a handful of proposed state constitutional amendments that will be at the end of the ballot.
Florida officials warn residents to prepare for wildfire season
Some Florida officials are warning about a possible increase in the chances of wildfires this year. Florida Commissioner of Agriculture Wilton Simpson said people should limit the amount of debris on their property as wildfire season begins.
Florida law officers’ phone calls can be recorded secretly, appeal court rules
A Florida appeals court has effectively opened a loophole in the state’s long-standing law against recording telephone conversations without the permission of both sides of the call.