Which Type Of Business Entity Is Best For My Company?
When a person wishes to create a business, it can be tempting to simply set up shop and go from there. However, doing this means that you and your partners have no safety net of any kind. Before officially starting your company, it is crucial to have a written agreement setting out the type of business you will choose to run.
Sole Proprietorships Can Leave You Vulnerable
For the smallest businesses, a sole proprietorship may be the best option, simply because a person can open their doors with a minimum of paperwork required. However, the trade-off in this situation is that there is no ‘corporate veil’ between the individual owner and the business. In other words, if the business fails, the owner’s assets will be reachable by creditors.
Two Types Of Corporations
There are two common types of corporations seen under Florida law, with the main difference being in who pays the taxes. Both “C” and “S” corporations are distinct entities from their owner, meaning that the owner is less vulnerable in the event of a financial collapse. However, a “C” corporation is subject to double taxation – that is, the corporation must pay income tax, and the shareholders must pay personal income tax on their dividends – while an “S” corporation is what is known as a “pass-through entity,” meaning that only the shareholders pay taxes.
Partnerships are the other most common type of business entity in Florida, though there are several different classifications of partnerships themselves. The most often seen is a general partnership, where two or more people share the profits and losses (and responsibilities) of the business, and both will pay personal income taxes instead of the business itself.
That said, partners can limit their individual responsibilities in certain ways – for example, a limited liability partnership (LLP) is a partnership in which one partner is indemnified against potential negligence of employees that are not under their control. In some cases it is possible to indemnify both partners against acts of the limited partnership as a whole, but every case is different.
Contact A Florida Business Entity Formation Attorney
Because every business has different needs and advantages, trying to create a legal entity to protect it can be a difficult endeavor. A Florida business entity formation attorney from the Hunt Law Group can assist you in this matter. Contact our office today at (727) 471-0444 for a consultation.