Florida LLC Vs. Incorporation

by David Carnes
In Florida, forming a corporation or an LLC requires the submission of a two-page document.

In Florida, forming a corporation or an LLC requires the submission of a two-page document.

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Although the corporation is one of the most popular business forms in the United States, every state has also authorized the formation and operation of the limited liability company, or LLC, which has gained wide acceptance in the business community. Each of these business entities offers advantages and disadvantages. The Florida Department of State administers the formation of both corporations and LLCs.

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Forming a Florida LLC

To form a Florida LLC, you must file the articles of organization with the Florida Department of State and pay a filing fee. You can download a template form for the articles of organization through the Florida Department of State website. The articles must include certain information including the name and contact details of the person filing the articles, the name of the LLC, its principal office address and mailing address, the name and address of the registered agent who receives official correspondence on behalf of the LLC, and the name of each manager or managing owner; owners are known as members. The registered agent and at least one LLC member, or an authorized representative of either, must sign the articles. You must mail the articles of organization to Registration Section, Division of Corporations, P.O. Box 6327, Tallahassee, FL 32314. The telephone number is 850-245-6052. A Florida LLC does not have to create an operating agreement, which typically details the LLC's internal operations, but it is advisable to have one, especially if there are several members.

Forming a Florida Corporation

To form a Florida corporation, you must file articles of incorporation with the Florida Department of State. You may download an articles of incorporation template form through the Florida Department of State website. The articles of incorporation must include the name of the corporation, the name and contact details of the person filing the articles, who is known as the incorporator, the corporation's principal office address, as well as its mailing address, if different from the principal office address, the corporation's purpose, the number of authorized shares, the names and addresses of the initial officers and directors, and the name and address of the registered agent. Both the person filing the articles and the registered agent -- or their authorized representatives -- must sign and date the articles. The articles should then be mailed to Department of State, Division of Corporations, P.O. Box 6327, Tallahassee, FL 32314. The telephone number is 850-245-6052. You must also pay a filing fee. The corporation should then create its bylaws. There is no set criterion for the content of bylaws, but they typically set forth internal rules and procedures for the corporation. The corporation does not have to file the bylaws with any governmental authority, but should keep a copy of the bylaws at its principal place of business.

Formalities

A Florida corporation must establish management structures in the manner required by statute; it must appoint at least one director and one officer. It must also hold formal annual shareholders meetings, record minutes of every meeting and record major decisions as written resolutions. A Florida LLC does not have to appoint directors or officers, does not have to record meeting minutes or prepare formal resolutions, and enjoys considerable flexibility in determining how it will be managed. If there is no LLC operating agreement that addresses management, however, state default rules will govern management of the LLC.

Federal Income Tax

The IRS taxes LLCs as partnerships -- or sole proprietorships, in the case of a one-person LLC -- unless the LLC elects to be taxed as a corporation. The IRS attributes the LLC's taxable income to each member in proportion to his relative stake in the company; it taxes each member accordingly. For example, a member with a 30 percent stake in the LLC will be taxed on 30 percent of the LLC's taxable income. LLC members must also pay self-employment tax on their shares of the LLC's taxable income. The LLC itself is not taxed, but must file an informational tax return. A corporation, or an LLC that elects to be taxed as a corporation, is taxed at corporate tax rates, and owners are taxed at individual income tax rates on dividends and distributions that they receive. A corporation or an LLC that qualifies as an S corporation and elects S corporation taxation is taxed like a partnership or sole proprietorship, with one exception -- owners who are not also employees do not have to pay self-employment tax on their shares of the entity's taxable income.

State Income Tax

Florida taxes corporations and LLCs in the same manner as the IRS, except that corporate tax rates are considerably lower; corporations are taxed only on Florida-source income. Florida does not assess individual income tax. Florida assesses approximately equal annual fees on both LLCs and corporations.