Choosing to form an LLC in Florida can be a business-savvy decision in many situations, although it will depend on your particular company. In addition to LLCs, other common business structures include corporations and sole proprietorships. Compared to these, LLCs offer many advantages that can appeal to a range of businesses. Many of the specific benefits outlined below are in comparison to sole proprietorships, as that is the default structure for businesses with a single owner.Learn More
The term LLC stands for limited liability company, so it should go without saying that there is a limit to your liability as an LLC. By contrast, sole proprietorships have absolutely no limits to the liability. With a sole prop, the business and owner share liability for assets and debts.
This means that if your sole prop is sued, the claimant will also be suing you as the owner, and you can lose your personal property. You may even have to sell some of your personal property as payment for debts. This unlimited liability is one of the biggest downsides of a sole proprietorship and among the strongest reasons to opt for an LLC instead.
There are also some tax benefits to forming an LLC over other types of businesses. Sole proprietorships, for example, pay higher taxes than LLCs. There are new tax rules that apply for small businesses, but those do not apply to sole props. This is because sole props pay taxes just like any wage earner would. The result is overpaying your taxes on earned income as a sole prop, something that does not happen to an LLC.
Additionally, there is no risk of double taxation with an LLC since LLCs have pass-through taxation status. With certain other structures, your company may have to pay taxes on its profits. Then you would have to report your income from the company and pay taxes on your personal income as well, resulting in double taxation. This is a problem with corporations. Pass-through taxation eliminates this, allowing LLC owners to keep more of their money.
It is also worth noting that the formation of an LLC will give your business a more professional reputation. When you have a sole proprietorship, you do business using your name. This is less professional and also limits your ability to grow. With an LLC, it is clear you registered with the state, and you also have room to grow. This shows potential clients and companies you want to work with that you are serious about your business.
You can also form your LLC in such a way that protects your privacy. When you form a business, you will need to file paperwork that includes things like your name and contact information, which then appears in the public record. You can, however, form an anonymous LLC that will hide this information. That reduces the risk of marketing or lawsuits.
To top it all off, there are companies available that can help you in forming your LLC, taking care of the paperwork and other requirements for you.