Starting a Business in Florida

UNDER CONSTRUCTION

CONTENTS

I.      Initial Planning

II.    Select a Legal Entity & Tax Structure

III.   Capital Structure

IV.   Agreements among Investors

V.     Licensing

VI.    Business Planning

VII.   Commencing Operations

       

Starting a business in Florida is pretty similar to starting one in any other state.  There are a few details that vary, but the basic pattern is the same:

Step I.   Initial Planning

The most basic choices come first:  who will own the business?  Will you be the sole owner,  or are there several principals, or perhaps more?  What are the participants paying for their interest in the business, and what will they contribute to operations on an ongoing basis?  What manner of business will you operate, one that sells services, sells products, creates a product, or a combination of the above?

Step II.   Select a Legal Entity and Tax Structure

By legal entity, we mean sole proprietorship, partnership, limited partnership, corporation, professional association (P.A.), or limited liability company (LLC).  The initial planning model chosen in step one will likely lead you to conclude which kind of legal entity  you will desire.

Sole proprietorships, of course, do not provide for limited legal liability, so few people chose those forms of ownership these days.  Limited liability restricts the responsibility of the owners to their investment in the business, rather than exposing their personal assets to risk.

The partnership is perhaps the most dangerous way to structure a business, because not only does it not provide limited liability, but each partner is liable for the acts of every partner.

Many businesses choose some form of corporation, in order to take advantage of limited liability.

The decision as to tax structure is basically between being taxed like a corporation, that is, the corporation pays income tax on its profits, and then each shareholder pays tax on any dividends received.  This double taxation is the biggest drawback of a corporation, but fortunately, the IRS permits small businesses to be taxed the same way a partnership is taxed, that is, the company files an information return with the IRS, but taxes are only paid at the level of the individual owner, for profits actually taken out of the business (in addition to any salary they draw as employees of the business).  This is accomplished by filing form 2553, the Small Business Election.  It must be filed within X days of incorporation.

Step III.  Determining the Capital Structure

How much money needs to be raised to get the business started?  The more money, and the more investors required to produce that level of funding, the more elaborate the planning for capitalization will be required.  Timing issues must be taken into account: i.e., will all the money need to be provided at once, up front, or will a series of cash inflows be required  over the initial business cycles be sufficient.  If the latter, will initial business operations provide adequate cash flow to fund growth of the business.

Step IV.  Entering Into Agreements Among the Investors

and/or Business Operators

The exact form and number of agreements depends on the kind of legal entity involved.  Partnerships and Limited Liability Companies generally begin with a single agreement,  a Partnership Agreement or an Operating Agreement (LLC’s).                     (...read more)

Starting a corporation frequently involves more agreements, as corporations frequently involve a greater variety of parties involved in the business organization.   (...read more)

Contents

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Initial Planning

Entity Selection / Tax Structure

Capital Structure

Foundation

Documents

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