TMCnet Feature
October 18, 2021

Why Florida is The Best State For LLC Formation

  • LLCs have become an increasingly common type of business structure in the US over the last three decades.
  • The LLC business structure offers significant advantages for small and medium-sized enterprises, combining the advantages of corporations with the advantages of sole proprietorships and partnerships.
  • Forming an LLC can be more or less advantageous depending on the state in which the company is formed, with states such as Florida being among the most attractive for the formation of LLCs.



The LLC (limited liability company) has become one of the most common types of legal business structures in the US over the last 30 years. As emphasized by the Small Business Administration, the LLC business structure offers significant financial, commercial and organizational advantages for entrepreneurs and small business owners. There is, however, considerable difference in the rates of LLC formation across the 14 states that permit this type of business entity. This is primarily due to variations in the relative costs and benefits associated with LLC formation and operation in these states. States with the highest concentration of LLCs include Delaware, Nevada, Wyoming, and Florida.

Florida offers particularly conducive conditions for LLCs. A Florida LLC can be established easily, quickly, and with minimal cost, and the state has favourable tax rates compared with other states where LLCs operate. The regulatory burden for businesses is also relatively low in Florida, which can make a significant difference for smaller companies (such LLCs) with limited resources, labour, and technical expertise in regulatory compliance.

This article will provide a quick overview of what an LLC is, and why it can be an advantageous type of legal structure for smaller businesses. The article will also review some of the advantages of forming an LLC in Florida in particular.

LLCs: What and Why?

A limited liability company (LLC) is a privately-owned, unincorporated legal business entity. LLCs are a hybrid type to business structure that is relatively simple and cheap to administer and operate.

The defining feature, and strength of the LLC is that it combines the advantages of a corporation with those of a partnership or sole proprietorship:

LLCs have limited liability, like corporations, and so business owners are not personally liable for their company’s cost and debts.

LLCs also have the same advantages of partnerships and sole proprietorships, for instance, LLCs enable business income to be passed through to the owner’s personal income, thereby freeing the owner from corporate tax obligations.

LLCs therefore offer several significant advantages for entrepreneurs when compared with other forms of legal business entities. Realizing the potential advantages of the LLC structure is, however, dependent on the state in which one intends to form their LLC.

Florida is one of the states that is most conducive to LLC formation and operation. The following section will briefly describe some of the reasons why.

Why form an LLC in Florida?

First and foremost, it is relatively simple to legally establish an LLC in Florida. The Really Useful Information Company (TRUiC) indicates that the costs of the process are negligible, and the LLC can be legally constituted and operational in a relatively short period of time.

 The state’s procedure for forming an LLC are as follows.

1. Filing the LLC

After choosing a business name, and deciding whether to proceed independently or with the help of a registered agent, the first step is to file the LLC’s Articles of Organization with Florida’s Division of Corporations.

The cost of filing Articles of Organization is $125, and the filing takes between two and four weeks to be approved.

2. Create LLC Operating Agreement

The Operating Agreement is a detailed outline of the LLC’s management and ownership structure. This provides a clear framework that guides owners and managers, while also serving as the reference point for any potential legal disputes. The LLC Operating Agreement identifies:

  • who owns what, and how much,
  • who is responsible for which business functions,
  • how profits and costs are distributed.

3. Obtain EIN

The third step is to apply for an Employer Identification Number (EIN) for the LLC. This is done via the IRS, and is a critical step in the legal formation of an LLC. The EIN enables an LLC to:

  • open a business bank account,
  • file state and federal tax returns,
  • hire employees.

Final steps to operating an LLC in Florida

At this point, the LLC is a legally constituted business entity. The only remaining steps are:

i) opening a bank account for the business,

ii) obtaining the relevant business licenses and permits.

These final steps are relatively simple and quick to complete because of the relatively light regulatory burden placed on businesses in Florida. Once the LLC is operational, it is eligible to begin capitalizing on the attractive tax rates and business environment that is available in  Florida.


 
» More TMCnet Feature Articles
SHARE THIS ARTICLE

LATEST TMCNET ARTICLES

» More TMCnet Feature Articles