How To Start A Limited Liability Company (LLC) In Florida
If you’ve started reading this article, that likely means that you have a dream. Maybe you have always dreamed of turning your hobby into a business. Or maybe you have been working hard throughout your career for someone else, and you are ready to be your own boss. Whatever the reason, starting a business is a time full of excitement, creativity, and problem-solving.
There are over 2 million businesses in the United States that are structured as LLCs, and it is the fastest growing organizational structure for new businesses. Why do so many companies end up as LLCs? Let’s take a look.
Why an LLC?
An LLC, is a flexible and relatively simple business structure. LLCs are owned by members, and ownership can range anywhere from a single-member to an infinite number of members (there is no limit on the number of members who can own an LLC). Members also do not necessarily have to be individuals. Corporations, other LLCs, and other entities may be members in an LLC.
Without any business registration and corporate protection, an individual conducting business could be held personally responsible for any liabilities incurred in the course of doing business. By registering as an LLC, all members immediately gain a certain level of separation and protection from the liabilities of the entity.
The flexibility of an LLC is shown in the several ways this type of entity can be taxed. If you are the sole owner/member of an LLC, you may choose to have that entity “disregarded” on your annual income tax forms. This just means that you will file your regular personal income tax return each year and include on it any income you brought into your LLC business, no separate tax return is required to be filed. If the LLC is owned by multiple members or partners, the LLC will file a partnership tax return, Form 1065, to show its distribution of profits, losses, and credit; however, the owners would still be taxed as if the income to the business was their own personal income.
An LLC can also be taxed as a corporation, if the members choose to elect to do so. If the members make such an election, the LLC will file a separate annual income tax return, as if it was any other kind of corporation.
If an LLC seems like it might be a good fit for your business, the following sections will demonstrate the process of creating a Florida LLC.
Choose a Business Name
When choosing a name for your business, the first thing you will have to do is check to make sure that the name you selected is available. As an LLC, you will be required to contain words that designate the entity as such in the business name. For example, you can choose to add the words “Limited Liability Company” or “LLC” to the end of your business name.
Choose a Registered Agent
Once you are sure that your business name is available, you will need to choose a Registered Agent. A Registered Agent is a person or business entity in the State of Florida who is able to receive mail and accept service of legal documents on the LLC’s behalf. Many small business owners choose themselves as the Registered Agent, while others will choose an attorney or business to fulfill this role.
File Articles of Organization
To become a legal LLC in the State of Florida, you are required to file Articles of Organization with the Florida Division of Corporations. This can be done in person, via mail, or online, and there is a one-time fee of $125. In the Articles of Organization, you will need to provide the Registered Agent’s information, as well as indicate whether the LLC will be member-managed or manager-managed.
A member-managed LLC is one in which the members are actively engaged in the day-to-day operations of the company. Most often, this is because there are a small number of members and they are all involved in the decision-making and management of the business.
A manager-managed LLC is one in which there are a larger number of members or the members do not want to be involved in the operation of the business. Under this structure, the members will appoint one or more managers who will run the business on the members’ behalves. The manager of an LLC may be one of the members or a non-member.
Create an Operating Agreement
In Florida, there is no requirement that an LLC have an operating agreement. However, we strongly recommend that all members of the LLC take the time to create a legal document outlining the ownership and operating procedures of the business, as well as the rules for selling the company or transferring interests for estate and succession planning purposes. This is especially critical if there is more than one member. You will not submit your operating agreement to the state, but Florida law requires that the operating agreement and all other records be kept at the LLC’s principal place of business.
Because there is no requirement to file with the state, an operating agreement is a very flexible document that can be tailored in many ways to suit the needs of your business. In general, it should lay out the financial and working relations among the members, and with managers, if any.
Most operating agreements include:
This will outline the date the company was created, the members who own the company, and how ownership is shared among the members. LLCs do not require that each member hold equal ownership of the company. Instead, this section of the operating agreement can be used to lay out the proportions of ownership allotted to each member.
Management and Voting
This section will designate whether the LLC is member-managed or manager-managed. If it is manager-managed, this section can outline what authority managers have over the company’s operation versus what authority members will retain. Members can also allocate the voting power of each member and how many votes will be needed to carry out an action.
The State of Florida requires that LLCs keep a record of the capital contributions made by each member of an LLC (this can be cash, service, or other assets), so it makes sense to include the capital contributions here in the operating agreement. This section can also include provisions for how additional money will be raised.
This section shows how the company’s profits and losses will be shared among the members and how and when they will be distributed.
As time passes, you may wish to add or remove members to the LLC. This section can explain a process for adding and removing members and provide a framework for each of the possible changes that may occur in the lifetime of a business. These changes may include if and how members may transfer their ownership, what happens if a member dies or chooses to leave, and how to handle conflicts among members (for example, if a married couple start an LLC and then get divorced).
This final section can describe the circumstances under which the company will be dissolved.
In addition to the above sections, operating agreements often include provisions for member meetings, who is empowered to sign checks and contracts on behalf of the LLC, and how disputes should be handled.
Operating agreements can be updated and changed at any time, and it makes sense to include a provision in the operating agreement for its own amendment.
Obtain an EIN
Once the LLC has been established with the State of Florida, you will need to obtain an Employer Identification Number (EIN) from the Internal Revenue Service. This is the federal tax number that identifies businesses with the IRS. You will need an EIN to file state and federal taxes, and banks usually require an EIN before you can open a business account
Open a Bank Account in the Name of the LLC
Now it’s time to get to business! The State of Florida requires that an LLC open a separate bank account from its owners before beginning to do business. It is a good idea to open this bank account as soon as possible. This makes it easier to track expenditures and income for the business.
Ask for Help BEFORE Making a Costly Mistake
While creating an LLC is one of the most straightforward business formation processes in Florida, there are still a number of things that can go wrong if the entity is set up incorrectly. It is essential that a business is structured correctly to preserve liability protection and to ensure the success and longevity of the entity. To make sure that your LLC is properly created and that your operating agreement is tailored to your business’ needs and creates the results you intend, it is advised to work with an attorney.
Ask a St. Petersburg Business Attorney for Assistance
At Kira Doyle Law, we offer a complete spectrum of legal services for business owners. If you are ready to build your dream business, start by calling our office in St. Petersburg, Florida, at 727-537-6818, to schedule an appointment with one of our experienced business planning attorneys today!