The Advantages and Disadvantages of Organizing as an LLC

Before you begin your new business, one of the first things you need to do is decide how you want to organize it. Although there are several different ways to organize, one of the most common is as a limited liability company (LLC). As with any other type of business entity, LLCs have advantages and disadvantages. Here are some of the issues to consider when deciding if you want to organize your business as an LLC.

Advantages of Organizing as an LLC in Florida

In Florida, LLCs are governed by Title XXXVI, Chapter 605 of the Florida Statutes, the “Florida Revised Limited Liability Company Act.” In some ways, LLCs have more flexibility than some of the other organizational structures. Here are some of the ways that a flexible LLC structure could benefit your company:

  • Members. There is no restriction on the number of members allowed in your LLC. However, if you want to apply to the IRS to be considered an S-Corporation for pass-through taxation, you must include one hundred members or fewer.
  • Flexible distribution of profits. Unlike some other forms of organization, you can decide how your profits are split. This means you do not necessarily have to have a 50/50 split like you would in a partnership.
  • Fewer formalities. If your business is an LLC, you are not required to record corporate minutes or resolutions. Although this activity is not legally required, it is still recommended as a good business practice.
  • Subsidiaries. Unlike some other business structures, LLCs are allowed to have unrestricted subsidiaries.

Disadvantages of Organizing as an LLC in Florida

Some of the disadvantages to forming an LLC in Florida include:

  • Fees. LLCs are more expensive to form than sole proprietorships or partnerships. Plus, these fees are not simply initial fees; they are also ongoing.
  • Challenging ownership transfers. It is more challenging to transfer ownership of an LLC than a corporation. This is because the operating agreement of the LLC must indicate whether ownership can be transferred and, if so, it must also indicate whether approval from the other members is required.
  • No corporate veil protection for single-member LLCs. There is some Florida case law that suggests that single-member LLC’s cannot shield their owners from liability. If you are the manager or majority owner of an LLC found legally responsible for harm, then you may find yourself personally liable and your assets at risk.

Ask an Expert

If you are still unsure of how you should organize your business, consider finding a mentor in your industry or consulting a professional, like one of the attorneys of J. Muir & Associates. We can help you objectively evaluate your business to determine the best way to organize. Contact us or give us a call today at (786) 533-1100.

Written by Jane Muir

Jane Muir