The economy is booming. There has perhaps never been a better time to start up a new business in the state of Florida.

Starting up a new business usually requires making some tough decisions. You will encounter a variety of unanticipated obstacles and dilemmas. For example, you’ll have to choose exactly what kind of business entity is best for you and is most compatible with your goals. This is where a Daytona Beach business formation attorney can help.

WHAT ARE THE FOUR TYPES OF BUSINESS ENTITIES?

The four types of business entities – that is, the four ways to form and structure a new business – are:

1. Sole Proprietorships
2. Partnerships
3. Corporations
4. Limited Liability Companies (LLCs)

But however you choose to set up your business, you will need to have the advice, insights, and services of a business attorney.

Your attorney can make certain that you’ve covered all the bases, filed all of the required forms, met all of the deadlines, and paid all of the fees. Your business attorney can also help you avoid legal problems in the future by helping you put solutions in place now – before problems arise.

HOW DOES A SOLE PROPRIETORSHIP WORK?

Sole proprietorships are the simplest business entities. A sole proprietorship has one owner. All you need to start a sole proprietorship is a Social Security number and the basic business licenses and permits.

Simplicity is one of the benefits of a sole proprietorship. Taxes are another. The income of the owner and business is taxed once – rather than twice, first as a company and then as an individual.

What are a sole proprietorship’s other advantages? You won’t have any conflicts with partners when you are a sole proprietor, and if you need to dissolve the business, it can be easily done.

Prospective sole proprietors should understand that the law actually does not distinguish between the owner and the business. Hence, one disadvantage of a sole proprietorship is that the owner’s assets can be imperiled if the business suffers difficulties.

Sole proprietorships are not for everyone. It takes talent and discipline to operate a sole proprietorship successfully and to take full responsibility for every decision.

HOW DOES A PARTNERSHIP WORK?

When two or more owners agree to operate the same business together, that business is a partnership.

Partnerships are similar to sole proprietorships in that they are relatively inexpensive and easy to form. Partnerships, however, have unique liability and tax issues.

One advantage of a partnership is the shared responsibility for decision making and management. A disadvantage is that unresolved conflicts can put the business at risk. Another disadvantage is that one partner’s legal or financial mistakes can put the entire operation in danger.

HOW DOES A CORPORATION WORK?

The advantage of a corporation is that it’s the most adaptable and flexible business form. Corporations are chartered by the state and have legal rights like a person.

A big advantage of corporations is the limited liability enjoyed by the owners because corporations are considered separate legal entities. If the business is sued, owners are protected from personal liability.

Corporations are subject to scores of regulations, and their financial activity is carefully scrutinized by tax authorities.

A corporation must appoint directors, conduct regular meetings, and record the minutes of those meetings. Ownership of a corporation can be easily changed through the sale or transfer of stock.

HOW DOES A “C” CORPORATION DIFFER FROM AN “S” CORPORATION?

A C corporation is considered a separate taxable entity by the IRS, is taxed at the standard corporate tax level, and is then in effect taxed again at the personal income tax level when dividends (or payments) are made to the shareholders.

An S corporation is not taxed at the corporate level. Instead, the income and losses are divided among shareholders and “pass through” to their personal income taxes.

An S corporation cannot have over one hundred shareholders, and they must be U.S. citizens or lawful permanent residents. C corporations face no similar restrictions.

C corporations may issue different classes of stock. S corporations may issue only one class of stock, so all shareholders have the same voting rights.

Finally, banks, insurance companies, and several other types of businesses do not qualify to become S corporations.

HOW DOES A LIMITED LIABILITY COMPANY (LLC) WORK?

An LLC has many of the advantages of a corporation, and along with the limited liability it provides, an LLC may be owned by an individual, a trust, another LLC, or a corporation.

With some paperwork and a business attorney’s help, an LLC can be taxed like a partnership, but otherwise, an LLC will be taxed like a corporation.

An LLC’s members and managers are not required to conduct regular meetings, so an LLC’s paperwork and legal restrictions are less burdensome than a corporation’s.

WHY IS A BUSINESS LAWYER’S HELP SO IMPORTANT?

Although these are the four basic types of business entities, the rules that govern the formation and management of these business types differ slightly from one state to another.

That’s why it is imperative if you are starting up a business here in the Sunshine State, to work with a skilled business attorney from the very beginning.

The right business attorney will help you determine which business entity is the best fit for your own goals and circumstances. A business lawyer will also help you draft whatever legal documents your new business requires, including:

1. by-laws
2. articles of incorporation
3. shareholder agreements
4. operating agreements
5. all other agreements, contracts, and policies

WHAT ELSE WILL A BUSINESS ATTORNEY DO ON YOUR BEHALF?

Florida law also requires business owners to name a registered agent to act on behalf of your business. Your business attorney should serve as your registered agent.

If you are served with a lawsuit, a summons, or any other official documents, a registered agent must be available and authorized to receive and sign for such documents.

When you are starting up a business in this state, having the services of an experienced business attorney is imperative. As your business grows, your attorney will be able to advise you on a variety of matters – from zoning to employment law to taxes.

Get the legal help you need – from the start – to make your new Florida business a success. It’s the very first investment your company should make.

By: Melody Lankford
After graduating from Davidson College, Melody Lankford earned her J.D. from Florida State University’s College of Law in 2004 and was admitted to the Florida Bar that same year. Ms. Lankford joined Raydon Corporation as in-house counsel in 2004. She worked there until 2012, when she founded the Lankford Law Firm. She is an experienced Daytona Beach small business attorney who offers sound legal counsel and experience-based insights to her business clients.