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LLC QUESTIONS




What is an LLC?

A limited liability company (“LLC”) is, in a sense, a cross between a corporation and a partnership. In a nutshell, an LLC gives its owners (i.e., “members”) the limited liability protection of a corporation with the tax attributes of a partnership. Members of an LLC, like the shareholders of a corporation, are not generally liable for the debts and obligations of the LLC. Like a partnership, the LLC “entity” is not subject to income taxation. Instead, the profits generated by the LLC “pass through” directly to the members, who will then report their share of the LLC’s profits on their individual tax returns.


How do you incorporate an LLC in Florida?

In order to create an LLC in Florida, articles of organization must be filed with the Florida Department of State, Division of Corporations. (608.407, F.S.). We can assist you in setting up your Florida LLC with the Division of Corporations. Additionally, in order to maintain an active status, LLC’s in Florida must file a Uniform Business Report with the Florida Department of State each year between January 1 and May 1, and pay the appropriate filing fee.


What are the benefits of an LLC?

Limited Personal Liability Protection: Similar to a corporation, the owners, or members, of an LLC are not personally liable for the debts of their business or claims made against it. With limited liability protection, the personal assets of the members are not subject to being taken by the creditors of your business.

Flexible Capital Structure: LLC members enjoy the benefits of a structure that allows great ownership flexibility of among its member-owners.

Flexible Distribution of LLC Profits & Losses: Typically, LLC’s will divide up profits and losses according to how much of the LLC each member owns. However, the LLC offers great flexibility in that LLC owners can choose to divide profits and losses pretty much in any manner they wish (subject to IRS rules).

Pass Through Income Taxation: One of the biggest benefits of the LLC has to do with its tax status. Like partnerships, an LLC is automatically recognized by the IRS as a “pass through” tax entity. In simple terms, this means that all of the business’s profits and losses “pass through” the business and are reflected and taxed on the owners’ individual tax returns. In contrast, the profits and losses of a C corporation must be reported and taxed on a separate corporate tax return, at special corporate income tax rates.

Flexible Management Structure: LLC’s are typically managed by their members (i.e., the owners), unless the members choose to elect management by a manager or management group. Management of the LLC by its members is called “member-management” while management of the LLC by a manager or group of managers is called “manager-management”. In Florida, unless otherwise provided for in the LLC’s articles of organization or operating agreement, the LLC will be deemed a member-managed company. (608.422, F.S.)


How do I choose a name for my LLC?

In Florida, the following guidelines must be followed in choosing your LLC name:

  • The LLC name must contain the words “limited liability company”, or either one of the following abbreviations: “L.L.C.” or “LLC”.;
  • The LLC name must not contain language which states or implies that the LLC is organized for a purpose other than what is permitted under Florida law or the LLC’s articles of organization;
  • The LLC name must not contain language which states or implies that the LLC is connected with a state or federal agency or a corporation or other entity chartered under the laws of the United States; and,
  • The LLC name must be distinguishable from all other entity names on the records of the Florida Department of State, Division of Corporations, except for fictitious name registrations and general partnership registrations.
(608.406, F.S.)


How many persons are required to incorporate an LLC in Florida?

One (1) or more persons may incorporate an LLC with the Florida Department of State. (608.405, F.S.)


How is an LLC taxed in Florida?

An LLC is generally not required to file a separate Florida corporate income tax return and is exempt from corporate income tax in Florida. However, there are exceptions to this general rule. For example, the income of the LLC is not exempt from tax if the LLC is owned by a corporation. Please contact the Florida Department of Revenue for further information.


Will I need to designate a registered agent for my Florida LLC?

Yes. You will be required to designate a registered agent for your Florida LLC. (608.415, F.S.). The role of the registered agent is to receive legal papers (service of process) and other official notices on behalf of the LLC entity. A registered agent may be an individual (such as a member or manager of the LLC) or a business which provides registered agent services. The registered office of the registered agent must have a Florida physical address. The designation of the registered agent and registered office of the LLC will be contained within the Articles of Organization.


Who is generally responsible for running and operating an LLC, and what are the distinctions between “members”, “managing members”, and “managers”?

In Florida, management of an LLC will be vested in the LLC’s members (unless provided otherwise in the articles of organization or operating agreement). A “member” is a person who has a financial or economic interest in the LLC. Alternatively, if provided for in the LLC’s articles of organization or operating agreement, an LLC may be operated by a manager or group of managers. A “manager” is typically a person who is appointed or elected to operate the LLC, but who is not necessarily a member of the LLC. A manager is typically an “outsider” who is brought in to run the day-to-day operations of the LLC. Finally, a “managing member” is a person who has a financial interest in the LLC and who has been appointed to manage the daily operations of the LLC.

Most smaller LLC’s choose to run their operations by its members, that is, they choose Member-Management. The reason is that the member-owners will want to control the daily operations of the LLC. However, in certain situations, it could be beneficial for the owners to choose an outsider, i.e., a manager, to run the day to day operations of the LLC. For example, if running the LLC requires special expertise or business know-how, the members may choose to hire a manager who has specific qualifications to manage the LLC’s day to day operations.


What is an operating agreement and should I adopt an operating agreement for my LLC?

An operating agreement is a document which regulates the affairs of the LLC and the conduct of the LLC’s business, establishes rights and duties among the members, managers and the company, and governs the relations among such parties with respect to one another and the LLC. The members of an LLC are not required to have an operating agreement in Florida. However, in practical terms, it may be a good idea to enter into an operating agreement in order to assure that the rights and responsibilities of all affected parties are clearly laid out in a written document. You may wish to consult an attorney for assistance.



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