Limited Liability Company or Corporation – business owners sometimes get confused on which business structure is good to follow. Both the structures have advantages and disadvantages. Here is a comparative study of the two systems for business owners in Florida.

Limited Liability Company – An Overview

According to law, LLC is a legalized form of business that provides its owners with protection from liability. The owners of an LLC are referred as its members. To form an LLC you need to file with the concerned state government authority, generally the Secretary of State.

Limited Liability Companies are managed with a specific document known as “articles of organization” or “rules of organization”. Articles are declared publicly by the state. Apart from articles of organization, there must be a private agreement for members. This private agreement governs the internal matters of the LLC like membership, management of resources, distribution of profit etc.

Features of Limited Liability Company

Below is a list of features of LLC:

1) No double taxation: Like partnership farms, LLC is entitled for pass-through taxation. The same income, assets or financial transactions are not taxed twice.

2) Liability protection: Under this business structure the members of the company are exempted from the debts and other obligations. It assumes that the debts, loans and any other financial or legal obligations are incurred for the LLC, not the members. Thus creditors can act against the LLC only. However, the LLC must be operated properly to make use of this advantage.

3) Easy to manage: LLC Florida employs easy operation procedures. No need to organize annual general meeting, no risk of losing authority of your business to a board of directors and lesser administrative works make LLC attractive to business owners in Florida.

Corporations – An Overview

A corporation is an entity in the eyes of law. A corporation has a distinct identity which is different from its members, rather shareholders. Like an individual, a corporation has the following features:

1. It can sue any other legal entities and other legal entities can sue it as well.
2. It can have assets.
3. It can employ agents.
4. It can enter into contracts with other legal entities.
5. It can make bylaws for its internal affairs.

Corporation is formed in similar way like LLC. Articles of incorporation must be filed with state government. Business owners need to register Florida corporation with the Secretary of State or someone with similar authority as required by state laws.

Advantages of Corporations

Here is a list of characteristics of corporate business structure.

1) Corporate taxation: Corporations that distribute the profit among the shareholders in form of dividends may experience double taxation. Corporate income is taxable and the shareholders should also report the dividend amount as personal income which is taxable again. However, S Corporation is a pass through tax entity; it does not report corporate tax, but the shareholders file income tax return on the dividend paid to them.

2) Protection from liabilities: Shareholders are not held responsible for the debts, judgment or any other obligation incurred in the name of the corporation.

3) Easy capital raising: Through stock selling, corporations can raise capital easily.

Thus it is clear that both LLC and Corporation have their own set of features, advantages and disadvantages. As a business owner in Florida you need to identify your priorities and interests. Some may find Inc Florida to be good for them; however, an LLC may seem suitable in another business scenario.