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The Florida Limited Liability company is the ideal business vehicle for starting and operation a business. There are more limited liability companies formed in Florida than any other state because the Florida statutes provide many LLC advantages and benefits.
Advantages and benefits of LLC in Florida
- Members enjoy Limited Liability, meaning that they are mostly personally protected from any liability of the LLC and successful judgments, as well as from the LLC itself.
- Allows for “multi-tiered” ownership wherein an S or C corporation can be a member--this can allow for substantial tax benefits, and increased liability protection.
- Florida allows for “single member” LLCs.
- The LLC allows for the "special allocation" of profits--the disproportionate splitting of Member profits and losses (in different percentages than their respective percentages of ownership). This means that Members can enjoy the benefits of receiving profits (and writing off losses) in excess of their individual ownership percentage, so long as it is clearly delineated in the Operating Agreement.
- Managing Members' share of net profit is considered earned income because the Managing Member is considered to be an active owner--therefore qualifying the Managing Member for special "fringe benefit" treatment.
- The Members' share of the bottom-line (“net”) profit of an LLC is not considered earned income, and therefore is not subject to self-employment tax.
- Members are compensated using either distributions of profit or guaranteed payments. A distribution of profit allows each member to pay themselves by merely writing checks--whenever they need the money provided the business has the available cash. Guaranteed payments represent earned income to the members, thereby allowing them to enjoy the benefits of tax-favored “fringe benefits.”
- The Managing Member of an LLC can deduct 100% of the health insurance premiums he or she pays, up to the extent of their pro-rata share of the LLC's net profit, because the profit is considered earned income.
- Membership Flexibility-many entities, such as a Corporation or a trust, can be a member of an LLC.
- As a Member, you can contribute capital or other assets to the LLC, or loan the LLC money to put dollars or value into the business. You can take dollars out by taking a repayment of your loan (plus interest), a distribution of profit or a guaranteed payment. If any of the members die, the LLC can continue to exist--subject to the unanimous positive vote on the part of all remaining members or a proviso in the Operating Agreement.
- Tax Advantages- Because of the “check box” taxation election flexibility, you can tailor your LLC’s taxation method to best suit your goals and strategies, weighing the various options and electing the method that allows your LLC to retain the largest share of its net profits.
- Capital Flexibility -Florida has no minimum initial capital requirement. While it is important that sufficient operating capital be present in order to provide for the safe operation of the corporation (and in order to maintain the corporate formalities), the lack of an initial capital requirement can go a long way in assisting your start-up company.
- Business-Friendly Courts- Florida has a renown, quality, impartial Court system. Florida courts are well-versed in corporate issues.
- Business Friendly Environment- Florida’s business-minded judicial, executive, and legislative branches of government are becoming more friendly to corporations, and more and more knowledgeable about how corporations transact and interact everyday. The annual fees for forming and maintaining a Florida LLC already compare very favorably with other states, and have seen double-digit reductions in recent years
- Confidentiality -Florida does not disclose, nor keep records of, members, managing members, etc., though Florida does outline specific record-keeping requirements of an LLC, listing management and members.
Florida also offers beneficial tax incentives; there is no personal income tax, subchapter S corporations are allowed (for pass-through taxation benefits), and there is no corporate franchise tax on capital stock, no state-level property tax assessment, no property tax on business inventories, and no sales and use tax on goods manufactured or produced in Florida for export outside the state.