Florida Corporation Types

by Jim Thomas
In order to incorporate, you'll need a board of directors.

In order to incorporate, you'll need a board of directors.

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Selecting a business entity in Florida, or any other state, is an important decision. There are four types of corporation in Florida, and each has its own distinct features. You can register other business entities in Florida, such as sole proprietorships or partnerships, which have their own pluses and minuses. But these entities are not corporations. Dictionary.com defines a corporation as an association of individuals, created by law, that has a continuous existence independent of its members, as well as powers and liabilities that are separate from its members.

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General Corporation

This type of corporation is a separate legal entity owned by its stockholders. As the Corporations of Florida website states, it's the most popular form of incorporation. There's no limit on the number of stockholders, and personal liability of stockholders is limited to their investment in the corporation. A Florida general corporation is a desirable business entity for raising capital through the sale of stock, and it allows management to offer such tax-free benefits as medical insurance and retirement plans. However, general corporations are heavily regulated and more expensive to set up. You also have to pay federal and state corporate taxes.

Close Corporations

Similar in most respects to Florida general corporations, close corporations are required to limit the number of stockholders. Directors of close corporations who want to sell their stock in the company must first offer the shares to existing shareholders.. A close corporation is a good choice for a group of owners when some of the group will be actively running the business and others will limit their involvement.

Subchaper S Corporation

Subchapter S corporations, or S corporations, were created by Congress in 1986 to aid smaller businesses; the total number of stockholders is limited to 75. An S corporation is a business authorized by the Internal Revenue Service and given special tax considerations. You get many of the same advantages as in a sole proprietorship or a partnership. The most valuable is avoiding double taxation: instead of taxes imposed on the corporation and then on the profits of individual stockholders, profits and losses "flow through" the corporation and are just reported by stockholders on their personal tax forms. As with other corporations, individual shareholders in the business can't be held liable for debts and obligations of the corporation.

Limited Liability Company

A limited liability company is a great choice for many business owners. It's similar to an S corporation in that it protects your personal assets from the liabilities and obligations of the business. It also offers favorable single-taxation treatment, with profits and losses passing through the corporation to the personal tax returns of the owners of the business. In addition, you receive more flexibility in terms of the organization and management of the business. In fact, Florida LLCs can choose to be taxed as either partnerships or corporations