For the investor or entrepreneur interested to start a business, 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.
Whether or not you are going to contact your Florida business corporate lawyers, we will try and present the basics of starting a corporation in Florida.
In Florida, corporations are not formed with a simple handshake, but instead business owners interested to start a corporation must comply with state law formalities and fees. Unlike partnerships and sole proprietorship and much like LLCs, Florida law requires that a corporation be registered with the State for a business to become a corporation. Similarly, a corporation 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 start and conduct its affairs in this state. To that extent, to form a corporation you must submit the Articles of Incorporation together with the required fees to the State of Florida.
What types of corporations are in Florida?
There are two types of corporations in Florida, the S corporation and the C corporation. Without addressing the classification in detail, it is important to note that an S corporation is a combination between an LLC and C corporation. The reason for this is because, similar to an LLC, the S corporation is also a pass-through business for tax purposes, meaning that all of the profits and losses of the company flow to the individual owners. But like a C corporation, the S corporation is owned by shareholders and not members. The C corporation is the traditional type of corporation. It is the most expensive type of business structure to establish and maintain.
What should the articles of incorporation contain?
The Articles of Incorporation should include information that specifically applies to an individual situation, but at a minimum the Articles of Incorporation must contain:
- The name of the corporation, which must not be the same or similar to the names of existing corporations already registered with the State of Florida. The name must contain at the end the words Corporation, Incorporated, Company or the abbreviations , Inc. or Co.;
- The mailing and street address of the principal office of the corporation;
- The corporate purpose;
- Details of the corporation’s stock structure;
- The name and address of the Registered Agent in Florida;
- The signature, name and addresses of the incorporators.
While the Articles of Incorporation must meet the minimum filing requirements above, the Articles may also have to include additional information depending on the special needs of each business. Further, Florida law does not require that you list in the Articles of Incorporation the corporation’s initial directors or officers authorized to manage the business. However, it is recommended to include the names and addresses of the officers or directors with the initial filing because most financial institutions in Florida will not open a bank account for the corporation without this information being designated on the State of Florida’s records. To access the corporation forms, visit https://dos.myflorida.com/sunbiz/start-business/efile/fl-profit-corporation/.
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What are the Bylaws for a corporation?
In addition to the Articles of Incorporation, Florida law provides for the existence of Bylaws and the scope of the Bylaws is codified in Chapter 607 of the Florida Statute.
The Bylaws are the governing constitution of the corporation and define the structure and rules of operating a corporation in Florida.
This agreement can regulate among others, how decisions are made, the number, power and duties of the Board of Directors and Officers of the corporation, the corporate ownership structure and shares the corporation is authorized to issue, information about Shareholder Meetings, and procedures for amending the Articles of Incorporation and Bylaws. The State of Florida recognizes the corporate Bylaws as governing documents. When a corporation does not have a set of Bylaws, the default rules codified in Chapter 607 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 any particular situation.
The corporate Bylaws are 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 corporation.
Are the Bylaws compulsory for corporations under Florida law?
Under Florida law, a corporation is not required to have a written corporate Bylaws or to register the Bylaws 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 corporation in order to prevent disputes about profits, distributions and direction of the firm. Further, a set of corporate Bylaws 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.
A corporation exists on its own as a separate and distinct business entity from its owners. The corporation may own property in its own name and sue and be sued in the corporation’s name. Capital is provided to the corporation in return for equity (stock, shares) or debt.
Shareholders in a corporation are not personally liable for the business obligations and actions of the corporation. In practice, it means that if the corporation cannot afford to pay creditors or the business does not succeed, each shareholder is not responsible to pay the debts, and the creditors cannot seize the personal assets of the shareholder such as bank accounts, cars, etc. to pay off all of the corporation’s debts.
What are the advantages and disadvantages of a corporation in Florida?
To summarize, the advantages and disadvantages of a corporation in Florida are:
- Easy registration
- Low cost
- Ongoing fees
- Tax treatment may be simple or complex
- Allows for at least 1 shareholder or owner
- Shareholders are not personally liable for debts and lawsuits
- Shareholders have freedom to contract for the management of the corporation’s business
- Flexible to raise money/capital
- Ongoing corporate formalities. For example, a corporation is required to hold regular stockholder or management meetings
- Fewer restrictions on ownership
- Flexible 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 lawyer in Miami, Florida USA to register a corporation in Florida or determine if the corporation structure is right for you.
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