Hello, I’m Doug G. Jackson, founding attorney of The Law Firm of Douglas G. Jackson. Today, I want to talk to you about different business structures you can use here in Florida.
Do you ever wonder what all of those letters after a business mean? In Florida, there can be LLC’s, Inc’s, Ltd’s, LP’s, PA’s, and others. That doesn’t even include the other acronyms such as dba’s. What do they all mean?
Well, in Florida, there are multiple types of business structures. Each requires different formalities and offer different levels of protection. Generally, people starting their own businesses (called “entrepreneurs”) will want to choose a structure that offers the most protection and the most flexibility, depending on their specific needs. For example, a small boot-strap start up might not be able to meet all the formalities of a corporation, but would still want some asset protection.
I know what you might be thinking, can’t I just start up a business without all the letters. Well, if you do that, it’s called a sole proprietorship, but it offers you no asset protection. Any debt or obligation taken on by the business can be collected from the property or asset of the entrepreneur. That means that if the entrepreneur doesn’t start an official form of business, filed with the state, and an employee of that business makes a contract with a customer and breaks the contract, the customer can actually come after the entrepreneur’s personal possessions. The same thing is true with a partnership, where two or more people start a business but don’t start an official form of business, filed with the state.
When a business such as a limited partnership, a limited liability company or corporation is formed and filed with the state, it offers significantly more protection. Generally, when these entities are created, any debt or lawsuit of the business will not be collectible against the entrepreneur or entrepreneurs who started the business. It offers significantly more protection. Also, with some structures, even if the entrepreneur gets into personal debt, maybe she has a gambling problem, the creditors can’t take the business properties to satisfy that debt. That’s why using the right structure is so important.
Additionally, sometimes there are tax benefits. This is generally a question for a tax attorney or certified public accountant (“CPA”). However, as an example if a corporation is formed and filed under subchapter “S” of the tax code (called and “s-Corp”), the entrepreneur may be able to collect some of the payments as “qualified dividends” which are taxed a lower tax rate than income.
Yes, it’s a complicated system, but knowing the LLCs and INCs can really make or break your business. If you’re serious about your business, and you should be if you’re starting a business, make sure that you understand what you’re doing. It could be the difference of your business’s success or your own personal bankruptcy. Don’t go bankrupt because of your business and don’t let your business go bankrupt because of you.
Remember, get your legal action at the Law Firm of Douglas G. Jackson.