Last Updated on December 19, 2022 by Anda Malescu
The most common business structures in Florida are Sole Proprietorship, General Partnership (GP), Limited Partnership (LP), Limited Liability Company (LLC) and Corporation.
The business structure you choose when forming a company determines everything from your day-to-day operations, ability to raise money, the amount you pay in taxes and how much of your personal assets are at risk.
What are the limited liability companies (LLC)?
In Florida, limited liability companies (LLCs) are not formed with a simple handshake. Unlike partnerships and sole proprietorships, Florida law requires that an LLC be registered with the State for a business to become an LLC. Similarly, LLCs organized under the laws of any other jurisdiction outside of Florida, including foreign countries, must register in the State of Florida in order to transact business or conduct its affairs in this state. To that extent, to form an LLC business you must submit the Articles of Organization together with the required fees to the State of Florida.
What are the Articles of Organization for the limited liabilities companies (LLC)?
At a minimum, the Articles of Organization must contain:
- The name of the LLC, which must not be the same or similar to the names of existing LLCs already registered with the State of Florida. The name must contain at the end the words “Limited Liability Company” or the abbreviations “L.L.C.” or “LLC”;
- The mailing and street address of the principal office of the LLC;
- The name and address of the Registered Agent in Florida;
- The signature of one member or authorized representative.
While the Articles of Organization must meet the minimum filing requirements above, the Articles may also have to include additional information depending on the needs of each business. Further, Florida law does not require that you list in the Articles of Organization the LLC’s initial managers or persons authorized to manage the business. However, it is recommended to include the names and addresses of the managers with the initial filing because most financial institutions in Florida will not open a bank account for the LLC without this information being designated on the State of Florida’s records. To access the LLC forms, visit https://dos.myflorida.com/sunbiz/forms/limited-liability-company/
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What is the Operating Agreement for the limited liabilities companies (LLC)?
In addition to the Articles of Organization, Florida law provides for the existence of an Operating Agreement and the scope of the Operating Agreement is codified in Chapter 605 of the Florida Statute.
The Operating Agreement is a contract that defines the structure and rules of operating an LLC in Florida. This agreement can regulate for example how decisions are made, what are the rights and duties of its members and managers, how accounting will be done, the withdrawals of members, and penalties for failing to perform according to the contract. The State of Florida recognizes limited liability company operating agreements as governing documents. When an LLC does not have an Operating Agreement, the default rules codified in Chapter 605 of the Florida Statute will apply. These are generic rules that are intended to cover a wide variety of business situations and are not optimal for the specific needs of a particular LLC.
The Operating Agreement is also important to protect the limited liability status. In the event of misunderstandings and conflicts, it may be used in court as evidence of the corporate structure, and of the rules and regulations that apply to the specific LLC.
Is an Operating Agreement required for LLC under Florida law?
Under Florida law, an LLC is not required to have a written Operating Agreement or to register the Operating Agreement with the state. However, while these documents and fillings are not required, it is recommended to have one in place with other owners of the LLC in order to prevent disputes about profits, distributions and direction of the firm. Further, an Operating Agreement signals the seriousness of a company to lenders and investors and may be required for other purposes such as business immigration into the United States.
An LLC exists on its own as a separate and distinct business entity from its owners. The LLC may own property in its own name and sue and be sued in the LLC’s name.
Members or owners in an LLC are not personally liable for the business obligations and actions of the LLC. In practice, it means that if the LLC cannot afford to pay creditors or the business does not succeed, each member or owner is not responsible to pay the debts, and the creditors cannot seize the personal assets of the members or owners such as bank accounts, cars, etc. to pay off all of the LLC’s debts.
What are the advantages and disadvantages of an LLC?
To summarize, the advantages and disadvantages of forming an LLC business in Florida are:
- Easy registration
- Low cost
- Ongoing fees
- Simple to file taxes
- Allows for at least 1 member or owner
- Members are not personally liable for debts and lawsuits
- Members have freedom to contract for the management of the LLC’s business
- Flexible to raise money
- Fewer corporate formalities than with a corporation. For example, an LLC is not required to hold regular stockholder or management meetings
- Fewer restrictions on ownership
- Limited flexibility in ownership transfers
- Minimal case law protection
Before registering your business with the State of Florida or any other State, choose a business structure that gives you the right balance of legal protections and benefits. Contact us or schedule a consultation with your business formation attorneys in Miami, Florida USA to register your LLC in Florida or to determine if the LLC structure is right for you.
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