Every aspiring business owner wants to begin their new venture with the proper foundation. Without an appropriate structure, a new business owner will have difficulty focusing on the entity’s real business of generating revenue and profits. In addition, the failure to properly structure the business entity can easily cause a series of chronic problems that affect the entity’s bottom line for years to come. Incfile review
In recent years, the Florida limited liability company (LLC or company) has emerged as an ideal investment vehicle and business entity for both business owners and real estate investors. As you can expect, there are numerous business and legal issues to consider when forming a new Florida LLC.
The purpose of this article is three-fold. First, it explains why the Florida LLC has become a popular investment vehicle. Second, this article provides an explanation of the most important business and legal issues that must be addressed when forming a Florida limited liability company. Finally, this article explains why it is important to have the counsel of an experienced and knowledgeable attorney when forming your Florida entity so that you can avoid costly mistakes that could cripple your new business from the outset.
WHY THE FLORIDA LLC HAS BECOME AN IDEAL INVESTMENT VEHICLE AND BUSINESS ENTITY
Florida has become a haven for both investors and entrepreneurs. One of the major factors that have contributed to the Sunshine State’s popularity is the favorable laws that govern limited liability companies. A LLC is a hybrid business entity having characteristics of both a traditional corporation and partnership. The primary corporate characteristic is limited liability. The primary partnership characteristic is the availability of pass-through taxation (i.e., no double-taxation).
In recent years, Florida has become the undisputed king of the LLC. The Florida Secretary of State registered 135,851 new limited liability companies in 2007. This entity offers an attractive combination to savvy investors – some protection from creditors and lawsuits and freedom from federal and state taxation.
PREFERRED INVESTMENT VEHICLE FOR FOREIGN NATIONALS
The limited liability company is the preferred investment vehicle for foreign nationals who want to invest in Florida real estate or establish a business presence in Florida. It’s also the preferred investment vehicle for passive investors who want the benefits of limited liability along with the tax advantages of partnership taxation.
One or more persons may form a limited liability company in Florida. “Person” means either an individual or an entity. There are no restrictions or prohibitions in relation to the nationality of an individual. Therefore, a foreign individual or entity can be the sole member of a Florida LLC. As will be explained later, a foreign national can obtain an Individual Taxpayer Identification Number from the Internal Revenue Service for the purpose of paying United States Federal income tax.
The company’s business activities can be extremely broad. Florida law defines a limited liability company’s business as every trade, occupation, or profession and other lawful business, purpose, or activity, whether or not carried on for profit.
Unless its articles of organization or operating agreement provide otherwise, each Florida LLC has the same powers as an individual to do all things necessary to carry out its business and affairs. These powers include the power to acquire, own, hold, improve, use and otherwise deal with real or personal property wherever located, enter into contracts, borrow money, invest or reinvest its funds, and otherwise conduct its business.
PROFESSIONAL LIMITED LIABILITY COMPANIES
Florida law allows licensed professionals to organize a special category of LLC. A professional limited liability company is organized for the sole and specific purpose of rendering professional service and that has as its members only other professional limited liability companies, professional corporations, or individuals who themselves are duly licensed or otherwise legally authorized to render the same professional service as the limited liability company. Thus doctors, attorneys, architects, real estate brokers and other licensed professional can obtain the same protection afforded by the LLC form.
Under Florida law, a professional company is organized and operated in the same manner as a traditional LLC with the caveat that a professional limited liability company must comply with several specific requirements designed to restrict membership to licensed professionals and maintain the integrity of the licensed profession. For example, a professional limited liability company is prohibited from issuing any of its capital stock to anyone other than a professional corporation, a professional limited liability company, or an individual who is duly licensed or otherwise legally authorized to render the same specific professional services as those for which the corporation was incorporated. In addition, no shareholder of a professional LLC may enter into a voting trust agreement or any other type agreement vesting another person with the authority to exercise the voting power of any or all of that person’s stock.