Choosing Between LLC or Corporation: Which is Better for Your Florida Business?
Starting a new business is exciting, but it can also be overwhelming, especially for small business owners who aren’t exactly sure what type of business entity is right for them. Two of the most common types are the Limited Liability Company, typically known as an LLC, and the corporation. However, there is also another popular entity choice, the S-corporation.
Before making a decision on an entity type, it’s important to understand the benefits of each and speak with a Florida business and corporate attorney who can give you advice on what business structure best serves your company in the long run.
The idea of incorporating in the first place is to create a legal entity that is separate from yourself. You evolve from a sole proprietorship into a legal entity formally recognized by the state. This can typically either be an LLC or a corporation. Creating a separate entity also can help to shield your individual/personal assets from business liabilities. Incorporating can help you start off on the right foot with your new business, but it can also help protect you and provide the right foundation to help you become more successful. You need to look at your short- and long-term goals.
Benefits of a Limited Liability Company
LLCs can protect the business owners, who are called members in this case. There is some personal liability protection, which is one of the main reasons people opt for an LLC. It can protect you from the personal risks involved in the event there is a lawsuit related to your business and help safeguard your personal assets.
Pass-through taxation is another LLC benefit. This means you don’t pay taxes at the business level; any income and losses are reported on your individual filings. The management structure in an LLC is also more flexible than with a corporation.
What is an S Corporation?
S corporations differ from traditional C-corporations as they are a “pass-through” entity, like an LLC, whereas corporations are taxed as separate business entities. There is also the concern regarding double taxation with a C-corporation in the event the corporate profits are passed to owners through dividends. They will pay taxes on any profits at the business entity level and the owners will also pay taxes on the dividends on their individual filings.
An S-corporation may provide some advantages to claim business losses during the start-up phase, and it may provide some savings on Social Security/Medicare taxes and self-employment taxes. However, S-corporations aren’t for everyone, nor will every business qualify. There are restrictions on the number of owners and who can be owners. For example, you can’t have more than 100 owners, nor can they be “non-resident” aliens. However, other S-corporations, LLCs, or traditional corporations can own an S-corporation.
Contact a Florida Business Law Attorney
Choosing the right business entity can be one of the biggest and most important decisions you will make for your business. To help make your decision a little easier, contact the Law Office of Clifford J. Hunt, P.A. We have over three decades of experience handling business law matters and can sit down with you and work through what business entity is right for you. Call our Seminole office today to schedule an initial consultation.