Florida Profit Corporation: Everything You Need to Know
A Florida profit corporation is a corporation that is established for the purpose of making a profit. Most corporations, unless they are formed as a nonprofit corporation, are established for the sole purpose of making a profit.3 min read
A Florida profit corporation is a corporation that is established for the purpose of making a profit. Most corporations, unless they are formed as a nonprofit corporation, are established for the sole purpose of making a profit. Particularly, the Florida corporation operates as a separate and distinct legal entity from its shareholders, who are also the owners of the company. This means that the shareholders cannot be held personally liable for the debts of the business.
There are many advantages to operating a Florida corporation; some of the advantages include:
- Limited liability protection
- Unlimited existence
- Tax benefits
- Ease of ownership transfer
- Easier to raise money than other business structures
Similar to that of an LLC, the corporate business structure offers limited liability protection for its owners. While there are some exceptions to this rule, which are referred to as instances of piercing the corporate veil, most often, creditors cannot use the owners’ personal assets to satisfy the business debts.
Some examples of piercing the corporate veil might include if the owner engaged in fraudulent or otherwise illegal activity, if the owner personally guarantees a loan, or if an owner holds himself out to be an extension of the corporation.
Corporations have an unlimited existence, as the death or illness of an owner will not cause dissolution of the business. Furthermore, a sale of shares will not cause the business to automatically terminate.
There are several tax benefits to a corporation, including insurance and retirement deductions.
It is rather easy and straightforward for one owner to sell shares of stock to another, without having to fill out any complex paperwork.
It is easier for a corporation to raise capital through selling shares and bonds. Unlike the corporation, other business structures, such as the LLC and partnership, cannot sell shares.
While there are several advantages to operating a corporation in the state of Florida, there are some disadvantages to the corporate business structure as follows:
- It costs more to form a corporation than a partnership, sole proprietorship, or LLC.
- There are additional corporate formalities required for corporations.
- There are greater state and federal regulations for corporations.
LLC vs. For Profit Corporation
There are both similarities and differences between the LLC and corporate business structure. As previously noted, both businesses provide limited liability protection for the owners and shareholders. Furthermore, both types of businesses operate as separate legal entities from its owners, thereby allowing for the liability protection.
Both the LLC and corporation must file a formal document registering the business with the Florida Secretary of State. Either articles of incorporation (corporation) or articles of organization (LLC) will be filled out and submitted, along with the applicable application fee.
One key difference between the LLC and corporation is the ownership structure. While LLCs have greater flexibility in terms of how the owners can oversee and manage the business, the corporate ownership structure requires the shareholders to hire a board of directors who will manage the significant business decisions. In turn, the board will hire officers who will have daily oversight over the company.
LLC owners can be individuals, corporations, LLCs, or other foreign businesses. Furthermore, LLCs can have an unlimited number of owners. Corporations, however, have some restrictions. C Corporations allow corporations, non-resident aliens, and LLCs to act as shareholders. S corporations, however, only allow a total of 100 shareholders; and such shareholders must be U.S. residents.
LLCs can choose to operate as either member-managed or manager-managed. A member-managed LLC means that the members (owners) will oversee the business whereas a manager-managed LLC means that the owners will hire a third-party manager to oversee the business.
LLCs and S corporations operate as pass-through taxation entities, meaning that these business structures don’t pay business taxes. Rather, the profits and losses pass through to the owners who will report it on their personal income tax returns. C corporations incur double taxation – once at the corporate level and again at the personal level.
When it comes to issuing stock, LLCs don’t have an ability to issue any stock. C corporations can offer as much stock in as many classes of stock as the company wishes. However, the S corporation can only issue one class of stock.
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