When you’re getting your business off the ground, one of the most critical decisions you have to make is what sort of operation you want to have – and that means choosing the right business entity for your needs.
The way you structure your business will ultimately have a significant impact on your legal responsibilities, your funding opportunities, your taxes and even your day-to-day operations. Here are the options to consider:
Sole proprietorship
A sole proprietorship is an unincorporated business that’s owned and operated by a single individual. No registration with the state is required under Florida law, although you will need to register a “Doing Business As” (DBA) name if you operate under a different name than your own. Sole proprietorships are easy to set up and manage, but they offer no legal distinctions between the owner and the business, which means that you have unlimited personal liability for your business’s debts and obligations.
Partnership
If you own the business with at least one other person, you may consider a general or limited partnership. General partners share equal responsibility for managing the business and bear unlimited liability for its debts. In comparison, a limited partnership has both managing general partners who have unlimited liability, while limited partners only contribute capital in exchange for some of the profits and have limited liabilities.
Limited Liability Company (LLC)
An LLC is one of the most popular business structures in use – for good reason. It combines the simplicity of a sole proprietorship or partnership with the liability protection of a corporation. When correctly structured, the member-owners of an LLC enjoy a flexible management structure and can choose either pass-through taxation or taxation as a corporation while having their personal assets protected from business debts. While LLCs do require registration with the state and ongoing compliance efforts and typically have higher operating costs, they may also have an easier time attracting investors or obtaining bank loans due to their more formal structure.
Corporation
Incorporation creates a legal entity that is fully separate from its owners, which provides the highest level of personal liability protection, and it offers the ability to raise capital through the sale of stock. Both S and C corporations are also attractive to investors because of their longevity (since the company is designed to continue even if the current owners leave). However, they’re much more complicated and costly to set up, require extensive record-keeping and have significant operation requirements, and the taxation can be burdensome.
Learning more about your business entity options here in Palm Beach or the surrounding area can help you choose the right path forward. Experienced legal guidance can help.