Pavese counsels and advises clients regarding which type of business entity is best suited to achieve the client’s short and long-term goals. In assisting our clients in making this decision, our attorneys take into consideration such factors as the amount of asset protection needed, insulation of personal exposure, state and local laws or regulations concerning the particular business contemplated, future expansion, organizational flexibility, as well as tax considerations. Our firm can also handle the filing of any elections needed through the IRS and perform any annual reporting requirements for each entity.
We take great care in advising clients regarding the particular entity chosen for their venture. Whether the entity chosen is a C-corporation, S-corporation, general or limited partnership, limited liability company, limited liability partnership, professional association, land trust, or other business entity has a great effect on who will bear the burden of the taxes paid by the entity, as well as who may have ultimate liability for the debts or obligations of the entity.
Sole Proprietorship
- Unincorporated entity owned by one person
- No state or federal filing requirements to operate
- Unlimited personal liability for owner
- No asset protection
- Owner taxed directly on all profits of business
General Partnership
- Unincorporated entity owned by two or more persons
- No state or federal filing requirements to operate
- Partners jointly and severally liable for all debts or liabilities (unlimited personal liability)
- No asset protection
- Owners report income on individual returns based on ownership in business (unless modified by partnership agreement)
Limited Partnership
- Comprised of general partners and limited partners
- Must file with Florida Department of State
- General partners liable for all debts and liabilities; limited partners not liable over amount invested in partnership
- Provides some asset protection for limited partners, none for general partners
- Report income on individual returns based on ownership in business (unless modified by partnership agreement)
Limited Liability Company
- Must file with the Florida Department of State
- Can elect for federal purposes to be taxed as a sole proprietorship or corporation (if single member LLC) or as a partnership or corporation (if multi-member LLC)
- Provides significant asset protection benefits
- Members generally only liable for amount contributed to business (no personal liability for being a member)
- Creditors of a member are only entitled to a charging order for LLC interest
C-Corporation
- Separate legal entity distinct from shareholders
- Must file with Florida Department of State
- Corporation taxed on its income initially; shareholders taxed on income when receive distributions or dividends from the corporation (double taxation)
- Possibility of Florida corporate income tax on profits
- Good asset protection benefits; shareholders generally liable only for their contributions
- Creditors of shareholder can acquire the shares of the shareholder (could allow a creditor to own, manage or even dissolve the corporation)
S-Corporation
- Separate legal entity distinct from shareholders
- Must file with Florida Department of State
- Must meet requirements in Internal Revenue Code in order to file an S-election; must maintain the requirements or will be treated as a C-corporation
- If successful election, no corporate level tax; tax items are passed through to shareholders who report them on individual returns (similar treatment as with LLCs)
- Good asset protection benefits; shareholders generally liable only for their contributions
- Creditors of shareholder can acquire the shares of the shareholder (in S-corporation context, this could result in company losing its S-election and being treated as a C-corporation, unless proper planning and structure is provided)