Business Law
Planning for the operation of a business entity requires the examination of a variety of factors. Among these are the relationship between the parties involved in the business, the equity structure, the type of business, as well as tax considerations and future plans. The choice of entity is a significant decision for any business enterprise.Sole Proprietorship
A sole proprietorship is a business enterprise owned by one person.
A sole proprietor is liable to the full extent of his or her assets for the debts of the business and therefore has unlimited liability. Any business can operate as a sole proprietorship. With the exception, perhaps, of local occupational licenses, no agreement or filing with a government authority is necessary to create or operate as a sole proprietorship.
Partnership
There are two basic types of partnerships – general and limited: General Partnership. The general partnership is an association of two or more persons to carry on as co-owners of a business for profit. The partnership may be organized by an agreement that is written, oral, or implied. In a general partnership, all partners are general partners and each is liable for the debts of the partnership to the full extent of his, her, or its personal assets. An interest of a general partner in a general partnership is considered personal property and is not freely transferable. Limited Partnership. A limited partnership is authorized by the Florida statutes and exhibits characteristics of both a corporation and a partnership. A limited partnership is formed by filing a certificate of limited partnership with the Department of State (limited partnerships) or secretary of state (corporations and limited liability companies). The Florida statutes provide certain circumstances that result in the termination of the limited partnership; however, the partners may agree in writing to alter those provisions.Read More>
A limited partnership must pay an annual fee on its invested capital with each annual report. The limited partnership centralizes management in the general partner or partners and limits the liability of the limited partners to the capital they have invested or have agreed to invest or the value of the services they have agreed to provide. However, each limited partnership must have at least one general partner who is liable for the debts of the partnership to the same extent as the general partner of a general partnership. Limited partnership interests are not freely assignable, unless the limited partnership agreement so provides.
Corporations
A corporation is formed by filing articles of incorporation with the secretary of state, paying the charter tax and filing fee, issuing stock, adopting bylaws, and electing directors and officers.
The corporate name must include the term “Inc.,” “Co.,” “company,” “incorporated,” or “corporation.” As is the case with limited partners, the liability of a shareholder of a corporation for the debts of the corporation is limited to the capital or services the shareholder contributed or agreed to contribute to acquire his or her stock. Management is centralized in the board of directors elected by the shareholders. Under Florida law, a corporation may be either a “for profit” or “not for profit.” Additionally, Florida law recognizes a professional service corporation. The corporate name of the professional service corporation must contain the term “chartered,” “professional association,” or “P.A.” The income taxation of the corporation is governed by federal law and has a variety of planning options that require the assistance of an attorney familiar with Florida corporate law as well as federal income tax law.
Limited Liability Companies
The limited liability company has been authorized by statute since 1982, but only recently has this form of entity been seriously considered as a viable business form for a small business. One or more persons executing and filing “articles of organization” with the Secretary of State accomplishes the formation of the limited liability company. The limited liability company’s name must contain the term “limited company,” “limited liability company,” or the abbreviation “L.C.” or “L.L.C.” The limited liability company must adopt an operating agreement, which has a function similar to the bylaws of a corporation. Unless the operating agreement provides otherwise, management is vested in the members of the limited liability company. The limited liability company is designed to allow the principals to enjoy the limited liability of shareholders of a corporation and the tax benefits of a partnership.Importance of Entity Planning
In today’s complex business, legal, and tax environment entity planning is not a simple decision to be made without direction.
Proper entity planning can put your enterprise on solid footing as it begins and can help assure your better legacy when it is time to implement an exit strategy. If you would like more information, please contact Medina Law Group, P.A. to schedule an appointment to meet with an attorney who has the expertise to assist you in planning for your business.