Pros & Cons of Limited Liability Companies in Florida

By Larissa Bodniowycz, J.D.

Pros & Cons of Limited Liability Companies in Florida

By Larissa Bodniowycz, J.D.

As with most business decisions, there are pros and cons when it comes to operating a business as a limited liability company (LLC) in Florida. LLCs always enjoy flexibility of formation and ownership and liability protection, but Florida law has limitations that don't appear in the LLC laws of other states.

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Pro: Flexibility and Liability Protection

Florida has largely adopted the Revised Uniform Limited Liability Company Act, a model set of LLC laws created by top nonpartisan representatives to try to harmonize LLC laws across the country. The advantage of this for business owners is that the uniform laws are at the forefront of LLC jurisprudence and seek to create a favorable structure for business owners.

Florida business owners who choose an LLC as their business structure gain all the textbook benefits of the LLC structure, including flexibility in management and operational structure, fewer formalities than a corporation, pass-through taxation, and limited liability protection.

Pro: Favorable Business Climate

Attracting businesses to the state is a priority for Florida, so the state works to provide business owners with incentives for operating there. Florida often receives recognition as one of the most favorable states for doing business. It recently ranked as the second most favorable business climate in a survey by Development Counsellors International.

Florida has a relatively low combined tax environment compared to other states. It does not have an income tax, so business owners don't pay taxes on their income. It also offers tax incentives for qualifying businesses. On top of that, regular business expenses—land, labor, and materials—cost less in Florida than in many other states.

In addition to the financial benefits, Florida's regulatory environment is simpler and quicker to navigate than that of many other states. This means it's easier for business owners to understand their legal obligations and faster and cheaper to obtain permits and other required approvals.

Con: Protection Limitations for Owners of Single-Member LLCs

One of the most significant downsides for LLCs in Florida is that single-member LLCs have less protection from the reach of creditors than multimember LLCs. Creditors of one of the owners of a multimember LLC can obtain charging orders for a debt but cannot force a sale of the owner's interest in the LLC.

Creditors of the owner of a single-member LLC can, in some circumstances, force the owner to sell their interest in the LLC to pay off the debt. This detail is a significant and controversial disadvantage.

Con: Advantages that Require Presence in Florida

Due to all of Florida's advantages for businesses, particularly for multimember LLCs, out-of-state business owners often ask about creating a Florida LLC to take advantage of the state's pro-business leanings. The problem with this is that merely forming a Florida LLC is not enough to benefit from most of the advantages. To receive these benefits, the business must actually have a significant presence in Florida.

An LLC formed in Florida that earns income in California must pay California's taxes on the income earned in California. As another example, individuals who receive income from the LLC are subject to the income tax where they reside, which might not be Florida.

There are many factors to consider before choosing to operate an LLC in Florida. Before making the leap, it's important to learn about whether the advantages outweigh any disadvantages you might experience by doing business in the state.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.