Fast, Professional Florida LLC
More LLCs and corporations are formed every year in Florida than almost any other state. Most Florida LLCs are for businesses and assets actually located in Florida. What are the advantages to using a Florida LLC for either active businesses or passive asset ownership (real estate, boats, etc.)? Many business owners decide to form their LLCs in Florida for a variety of reasons. Among the many benefits of forming a Florida LLC: low annual fees, favorable laws to multi-member LLCs, and an easy startup process. Single-member LLCs should not be formed in Florida. Instead, they should be formed as Delaware LLCs.
Learn more about the entity below, plus how to file and form a Florida LLC.
Why Should I Form a Florida LLC?
Florida has more LLCs formed every year than any other state. Most are owned by members who are domiciled in Florida for both active businesses and passive asset ownership (real estate, boats, etc.). Many LLCs decide to incorporate in Florida for a variety of reasons.
- No Income Tax and Low Annual Fees
Unlike a corporation, a Florida LLC is considered a “pass through” entity for income taxes. Instead of taxing profits at both the company and individual level, any profit will “pass through” the LLC to the tax returns of individuals. As an added benefit to this, business conducted in Florida by individuals domiciled in Florida is not subject to any personal income tax, meaning in this case that members of a Florida LLC would only have to pay federal income taxes on LLC income. Florida does have an annual fee for LLCs, but it is very low relative to other states (a flat fee of $138.75).
- Flexible Business Structure
LLCs are governed by operating agreements that are comprehensive in arranging the affairs of the business to match the members’ wishes. Bylaws that govern corporation elections are limited in scope and do not include restrictions on transfers of shares that most small business owners desire in order to keep out unwanted partners. Operating agreements are much more flexible, allowing for elimination of certain duties and formal “dance steps” that corporations require. Formalities, such as annual meetings with minutes, do not need to be followed by LLCs; this removes much of the complication and bureaucracy associated with managing a business.
- No Personal Debt Liability
One of the major advantages of forming an LLC in Florida is that, while an LLC has the same powers as an individual to carry out business and further its interests, the LLC and the individual members are distinct entities. Many Florida LLCs are formed for this reason. Vacation homes or other property in Florida, such as boats, could be subjected to liability for a variety of reasons. These include slip and falls, accidents, or other problems.
- Protection of Original Control
In Florida, LLCs with multiple members are exclusively governed by a charging order remedy. If a creditor of one member of an LLC attaches shares of the member, the creditor does not gain any voting power. The lien on the membership interest only entitles the creditor to the distribution of any profits associated with the interest.
Florida has a slightly different charging order law for single-member LLCs. Following a decision by the Florida Supreme Court and a subsequent law change by the Florida legislature, a creditor may foreclose on an LLC instead of obtaining a charging order if they can prove that the charging order will not be sufficient to satisfy the debt in question.
- Privacy and Flexibility of Ownership
Unlike other states, Florida only requires that LLCs provide a list of managers on the Articles of Organization. This means that Florida does not require the names of the members of the LLC to be on public record, unless they are listed as managers.
Florida LLCs can have foreign members, while still retaining their status as a “pass through” entity for taxation. Other business structures, such as corporations, do not permit the combination of foreign owners and “pass through” entity status.
- Easier Startup
Florida does not have a minimum capital requirement to form an LLC. This means that a business can be formed without any assets, which a number of other states do not permit.
How do I form a Florida LLC?
- Choosing a Name
To begin forming a Florida LLC, you must first decide what the LLC will be named. The name must satisfy a few requirements. First, the name cannot conflict with any other company names or trademarks in the state of Florida. The website of the Florida Division of Companies has a business search to help meet this requirement. The name must also contain some designation that the company is an LLC. Finally, the name cannot imply any affiliation with the government, a profession that requires a special license, a bank, or any activities unauthorized by law. Unlike many other states, Florida does not have a procedure for reserving an LLC name prior to filing the formation documents.
- Choosing a Registered Agent
In order to form an LLC in Florida, you need a registered agent in Florida with a valid Florida mailing address. The duties of a registered agent require trust and diligence, which is why many Florida LLCs choose a reputable incorporation firm, such as Agents and Corporations, Inc. (Incnow) to serve as their registered agent. IncNow’s incorporation specialists can be hired to complete the LLC formation process.
- Drafting and Filing Articles of Organization
To register a Florida LLC with the Division of Corporations, you need to file articles of organization. Florida law requires that a few key elements be present in the articles of organization:
- Name of the LLC – the name of the LLC must comply with all of the requirements above to be approved;
- Office Location – The mailing and street address of the principal office of the LLC (your address). This does not necessarily have to be in Florida;
- Registered Agent – As mentioned above, you must have a registered agent with a Florida mailing address. The registered agent must also sign the articles of organization, showing their acceptance of the position and the associated responsibilities; and
- List of Managers – A list of the managers of the LLC, along with a designation for those who are members of the LLC. While not necessary, there can also be a statement indicating whether the LLC is to be managed by the members themselves, or if it will be managed by a third-party manager that the members appoint.
Additionally, there are many optional components that could be included in the articles of organization. These include a specified start/end date for the LLC, a statement indicating whether an assignee can become a member without the consent of all members, or other provisions necessary to the LLC. When all of the necessary provisions are in the articles of organization, an authorized individual needs to sign the articles. This is usually done by one of the members of the LLC, but it can be done by one of their authorized representatives.
Unlike most states, Florida allows LLCs to complete an online order form without an image or a document scanned or sent to their office, but we do not recommend filing articles of organization online. We suggest filing the form by fax with signatures because it is preferred by lenders. Filing articles of organization requires a $125.00 filing fee. When the articles of organization have been approved by the Division of Corporations, the LLC is officially formed. Your incorporation service then sends the filed document to you with other items that you have ordered.
- Drafting and Executing an Operating Agreement
While the articles of organization will officially form the LLC in Florida, the operating agreement is vital to the existence of an LLC. The operating agreement is what governs the operation of the LLC, and will include provisions, such as distribution of profits and ownership interest, transference of interest, dissolution procedure, management provisions, and liability and indemnification, among others. The operating agreement constitutes a contract, so it must be signed by all members to be legally binding. Operating agreements can be amended in the future to reflect various changes, but having a strong operating agreement is necessary for an LLC. While it is possible to draft your own operating agreement, many LLCs choose to hire professional incorporation firms or attorneys to draft an operating agreement. The professional experience of an incorporation firm, such as Incnow, allows them to include provisions to avoid many future conflicts.
Florida law does ban certain provisions from being excluded in LLC operating agreements. These bans regard reductions in duties of members and managers, including the duty of loyalty, duty of care, and obligation of good faith and fair dealing. Additionally, the operating agreement cannot restrict rights of access to records, restrict rights of anybody other than managers, members, and assignees, or vary the requirements for winding up the LLC.
- Do I need an Incorporation Specialist to Form a Florida LLC?
The above steps are possible for an individual to complete without the assistance of an incorporation specialist. However, the complex nature of the documents in question and the duties of a resident agent would be well-handled by a professional incorporation specialist who has experience in this area. Having an operating agreement that precludes any disputes over the workings of the company could avoid costly potential litigation. While it is possible to form a functioning Florida LLC without an incorporation firm, their assistance would be valuable to any entrepreneur or business owner.