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About our Business Formation Services

The first step in forming your new business in Florida is deciding what kind of business entity you wish to form. We are ready to help you decide between a Limited Liability Corporation, a Professional Association, a C-Corporation, an S-Corporation, a Sole Proprietorship or a Partnership.

We will discuss your corporate structure needs, objectives and tax preferences and help you get that first step accomplished efficiently and with tranquility.

Here are some key questions you likely will have to consider:

  • Should you form an LLC, a partnership, a professional association, a professional limited liability company or incorporate ?
  • Will you want to elect to be an S Corporation?
  • Will you  need an occupational license or a zoning permit?
  • Will you need an EIN for your new incorporation or LLC?
  • What is a Registered Agent and would you like us to be your Registered Agent?
  • What form of Florida corporate formation will help most with business goals?

Sole Proprietorship
A sole proprietorship is owned by one person, but may have numerous employees. It requires the following documents be filed:
- Occupational license
- Federal Employer Identification Number

There is no legal separation between the owner and the proprietorship, which means the owner is liable for all liabilities and subject to seizures or liens of personal property by creditors. This business form imposes an additional self-employment tax on the earnings and forfeits some tax advantages.

General Partnership
A general partnership is not incorporated and must be owned by at least two persons, who are referred to as general partners. A business that starts with partners, but lacks formal documents may be considered a general partnership. It requires the following documents be filed:
- Occupational license
- Federal Employer Identification Number

All general partners are liable for all liabilities and subject to seizures or liens of personal property by creditors. The general partnership does not pay taxes as the general partners will report the profits and pay income taxes on their distribute shares of profits.

Limited Liability Partnership
An LLP requires the following documents be filed:
- Partnership Registration Statement
- Statement of Qualification

Your partnership name will require an L.P. or L.L.L.P designation at the end of it. This type of business formation must have at least one general partner; limited partners are protected from personal liability for the the liabilities of the Limited Partnership. Failure to file a Statement of Qualification results in all partners having unlimited personal liability for the partnership’s liabilities. Failure to file a timely annual report will cause the L.L.L.P to lose its limited liability protection.

Professional Association
A professional Association requires the following documents be filed:
- Articles of Incorporation with the specific profession practiced included
- It is subject to occupational licenses
- Federal Employer Identification Number
- Form 2553 (for S Corporation status)

A Professional Association needs to have P.A. as a designation after its name. The owners of the Professional Association are referred to as shareholders and do not have personal liability for corporate liabilities in the course of business or from malpractice from other professionals in the same corporation. However, the liability subsists for the individual’s own malpractice. Failure to file a timely annual report only results in a late fee, but does not alter liabilities.

This type of business formation also benefits from electing S Corporation form or C Corporation form. Regarding a Florida corporate formation, a C corporation will mainly have tax deductions for health insurance and medical expenses. An S corporation will have lower social security tax and medicare tax.

Limited Liability Company

The limited liability company is not a corporation, but a company that allows you to pick a form of taxation. In an LLC, the members of the LLC are protected from personal liability due to the activities of the LLC. In short, a creditor will only be able to obtain what is in the LLC to fulfill the amount of debt owed, but will not be able to go after the members of the LLC personally unless they were at fault, commingled assets or other specific circumstances indicating fraud. This means that with an LLC you maintain flexibility, protection and control over the business and can choose to be treated for tax purposes as an: S Corp, C Corp, or Partnership.

In the event you choose to be a C-Corp, the corporation will be taxed as a separate entity and the members of the corporation who will profit from distributions will also be taxed for the profits. The best option in that case would be to increase compensation to the member-employees also known as shareholder-employees. The compensation is a business expense that will reduce the annual profits.

The S Corp status is only available under certain conditions. The LLC will not pay taxes individually, but the profits, losses, and credits will pass down to the shareholders who will in turn report it to the IRS.

If treated as a partnership, the members will be taxed directly, each in proportion with their share in the business. Each member will have to report his share of his tax liability, and each tax liability retains the same character it had when earned or incurred by the LLC. The pass through of items to members means that income avoids being double taxed; additionally, losses may offset income that the member may have from other sources.

Corporation

A corporation has the advantage of the corporate veil and will protect the shareholder’s personal assets. However, it will only be taxed as an S-Corp or C-Corp, which gives less flexibility than the LLC.

  Differences between an S Corp and C Corp:

The C Corp Status:

-       files federal tax returns every year on Form 1120

-       there is a corporate level income tax on the profits of the C Corp

-       if dividend is paid to shareholders from retained earnings, the dividend is included on the personal tax return of each shareholder (double taxation)

This type of corporation is proper for corporation that plan on operating with little to no annual profits. You can accomplish that by paying an increased compensation to the shareholder-employees. The compensation is a business expense that will reduce the annual profits.

The S Corp Status:

-       files federal tax returns every year on Form 1120S

-       it is considered a pass-through entity under Florida and federal tax law

-       there is no Florida corporate income tax

-       a pro-rata portion of the annual profit or loss of the S Corp is reported to each shareholder on Schedule K-1 and included in the personal tax return of each shareholder.

-       The distribution of S Corp profits is exempt from 15.3% social security and medicare tax

-       Wage reduction strategies are available – pay reasonable wages and profits in order to pay as little as possible of social security and medicare taxes

Example:

Annual revenue: $87,000

No expenses except compensation

Payment to sole owner made on Dec. 31st in the form of 2 checks

Check #1 : salary: $77,000 payment subject to social security and medicare taxes

Check #2: profit distribution: $10,000: payment not subject to social security and medicare taxes because distribution is not subject to it. Thus, you save $1530.

Please contact us for additional information to help you evaluate the most appropriate business form. We are ready to incorporate your business in 1-5 business days; please see our Rates page for prices and packages.

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