Compare: FL LLC vs FL Corporation

If you are starting a Florida business but are not sure yet what kind of structure you want to use, it is best to compare Florida business entities to find which works best for you. Corporations and limited liability companies both have pros and cons. When you compare Florida business entities, it’s important to keep in mind the characteristics that are most important to you. LLC vs Corporation: read below to decide.

What Florida Business Entity is the Most Private?

When you compare Florida business entities, you may want to consider the privacy protections afforded by particular structures. The most private Florida business entity is the LLC, specifically our completely anonymous Florida Double LLC package. A Florida corporation cannot keep your private information out of the public record. But our unique anonymous LLC can.

Florida LLC: An Overview

A Florida LLC is formed by filing Articles of Organization with the Department of State.

Pros

  • Privacy: you can form an anonymous Florida LLC, but you cannot form an anonymous Florida corporation.
  • Less formal: LLCs have far fewer administrative requirements (no board of directors, corporate officers, annual shareholder meetings, etc.).
  • Pass-through taxation: profits are reported on your individual tax return, which means you don’t end up getting taxed twice.

Cons

  • Self-employment tax: unless you opt to be treated as an S-corp, you’ll have to pay taxes on all profits, which are generally higher than the corporate tax rate.
  • Limited-life: unless specifically addressed in your Operating Agreement, the departure of an LLC member will dissolve your company.

Florida Corporation: An Overview

To incorporate in Florida, you file Articles of Incorporation with the Department of State.

Pros

  • Re-investment: the corporate tax structure allows you to invest profit back into the company, a function that used strategically can lower your tax burden.
  • Legal precedent: there is far more law regarding corporations than LLCs, which makes it far easier to understand exactly what your business can (and can’t) legally do.
  • Benefits: corporations can offer an array of benefits in order to retain talented employees, including stock options, and these benefits are tax deductible.

Cons

  • Double-taxation: corporatations pay an entity tax, and shareholders are taxed on the dividends they receive.
  • Formal requirements: corporations are intricately structured and face an array of reporting and record keeping requirements that can be cumbersome and costly.

What Is an S-Corporation?

LLC vs Corporation is not the only consideration. If you are looking to compare Florida business entities to discover which Florida entity is right for you, you may have heard about the S-Corp.

An S-Corp is not actually a different business structure like an LLC or a Corporation. It is a tax designation. An LLC can be as an S-Corp by the IRS, and so can a Corporation. In either case, the company must submit paperwork to the IRS requesting the tax designation.

An S-Corp has a slightly different tax structure: as a shareholder of an S-Corp, you can draw a salary from the company and collect dividends. Self-employment tax is paid on the salary, but the dividends are taxed at the lower, standard income tax rate (self-employment taxes are higher because you are paying for Social Security and Medicare both as the employee and the employer). This can save you considerable money if managed properly.

To learn more about filing for an S-corp designation, you can go to the IRS website.