Florida S Corp vs LLC
Florida S Corp vs LLC
Florida S Corp VS LLC
Advantages and Disadvantages
Florida S Corp advantages and disadvantages - S Corp status is recognized by the State of Florida. Further, Florida does not have a personal income tax; thus shareholders would not be taxed on corporate earnings. A separate state election from the federal election is not required.
For the first year in which an entity qualifies as an S Corp, the company must file the informational portion of Form F-1120 the Florida Corporate Income/Franchise tax return.
Florida S Corp vs LLC
S Corporation Definition-A corporation with 75 or fewer shareholders,that has elected and qualified for a special tax status with the Internal Revenue Service (IRS).Florida S Corporations and tax-exempt organizations are generally not required to file a Florida corporate income tax return if they do not have federal taxable income. If they have federal taxable income, however, they are then required to file a Florida corporate income tax return and pay any tax due.
The main advantage associated with the S Corporation is that the income passes through to the shareholders, therefore avoiding a perceived double taxation of a C-Corporation.
Florida S Corp vs LLC
The S Corporation:
An "S Corporation" is a corporation that elects to be taxed under Subchapter S of the Internal Revenue Code (enacted in 1958 and periodically amended) and receives IRS approval of its request for Subchapter S status. As a legal entity (an artificial person), the S Corporation is separate and distinct from the corporation's owners (the stockholders). Under Nebraska incorporation law, there is no distinction between a C corporation and an S corporation.Florida S Corp vs LLC
Florida S Corp
Advantages and Disadvantages
Advantages of the S Corporation:
- The independent life of the corporation makes possible its continuation, and the relatively undisturbed continued operation of the business regardless of incapacity or death of one or more stockholders.
- Fractional ownership shares are easily accommodated in the initial offering of stock.
- The purchase, sale, and gifting of stock make it possible to have changes in ownership without disturbing the corporation's ability to conduct business.
- The requirement that the corporation's finances and records be separate from the finances and records of stockholders reduces the risk of unrecognized equity liquidations.
- With only a few exceptions, under the Subchapter S election for taxation as a partnership the S corporation pays no income taxes and corporation income or loss is passed through direct to the stockholders.
- To the extent the corporate shield is maintained and other investments and savings of the stockholders are not at risk, the personal life of stockholders is simplified.
- The annual meetings of stockholders and consultations with legal counsel can provide stimulus for improved communication within the stockholder group (often a family group) and can provide more comprehensive guidance for management.
- Depending on the corporation's business record and the policies and practices of prospective lenders, access to credit and the ability to secure needed resources may be improved.
- Earnings representing "return on investment" (interest, rental payments, etc.) are not subject to self-employment tax as long as stockholder-employees receive adequate compensation for labor and management of the business.
Florida S Corp vs LLC
Disadvantages of the S Corp:
- Lenders may require personal guarantees from corporate officers as a condition of supplying credit, thus negating the limitation of liability.
- Conflicts or disagreements among the stockholders may immobilize decision making.
- Restrictions on the sale of stock and/or buy-back agreements included in the bylaws may prevent minority stockholders from being able to recover the value of their investment in the corporation.
- Through the processes of gifting and inheritance, stock ownership can become divided among many persons who are not active in the business and they may become a voting block that does not support needs and decisions believed desirable by managing stockholders.
- Over time, corporation paid benefits for stockholder-employees may become costly and exceed the ability of the business to pay.
- Employment benefits such as life insurance, health insurance, and housing costs are taxable income to stockholder employees with 2 percent or more stock ownership and to employees who are directly related to persons owning 2 percent or more of the corporation stock.
- If appreciated assets are owned by the corporation and the corporation is dissolved, significant income taxes on the appreciation amount will be generated.
Florida S Corp vs LLC
Florida LLC Advantanges and Disadvantages
A Florida LLC satisfies a necessary condition of your business planning developement in that it meets the requirement that you establish a legal form of organization in order to gain the statutory benefits and protection available in Florida to your LLC. Your Florida LLC establishes a legal presence within the state, which you can use either as a platform for in-state operations or by registering your Florida LLC via your agent's physical address in order to meet the purely statutory requirement for tax and filing purposes absent an in state operation.The LLC is a relatively new type of hybrid business structure that is now permissible in most states. It is designed to provide the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. Formation is more complex and formal than that of a general partnership.
The owners are members, and the duration of the LLC is usually determined when the organization papers are filed. The time limit can be continued if desired by a vote of the members at the time of expiration. LLC's must not have more than two of the four characteristics that define corporations: Limited liability to the extent of assets; continuity of life; centralization of management; and free transferability of ownership interests.
Florida S Corp vs LLC
Advantages of LLC
- Limited Liability: Owners of a LLC have the limited liability protection of a corporation.
- Flexible Profit Distribution: Limited liability companies can select varying forms of distribution of profits. Unlike a common partnership where the split is 50-50, LLC have much more flexibility.
- No Minutes: Corporations are required to keep formal minutes, have meetings, and record resolutions. The LLC business structure requires no corporate minutes or resolutions and is easier to operate.
- Flow Through Taxation: All your business losses, profits, and expenses flow through the company to the individual members. You avoid the double taxation of paying corporate tax and individual tax. Usually, this will be a tax advantage, but circumstances can favor a corporate tax structure.
Florida S Corp vs LLC
Disadvantages of LLC
- Limited Life: Corporations can live forever, whereas a LLC is dissolved when a member dies or undergoes bankruptcy.
- Going Public: Business owners with plans to take their company public, or issuing employee shares in the future, may be best served by choosing a corporate business structure.
- Added Complexity: Running a sole-proprietorship or partnership will have less paperwork and complexity. A LLC may federally be classified as a sole-proprietorship, partnership, or corporation for tax purposes. Classification can be selected or a default may apply.
By Florida and other state law in order to proceed with forming a llc, you need to prepare a written abstract detailing your llc purpose, the names of your initial Florida LLC members, the name and address of your Florida registered agent, the details of which will be introduced into the body of your LLC operating agreement and related Florida LLC formation documents assembled for application to the state of Florida.
Florida S Corp vs LLC
Florida S Corp vs LLC Business Tax Climate Ranks 5th
Florida's 2011 Business Tax Climate Ranks 5th
Florida ranks 5th in the State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. Neighboring states ranked as follows: Georgia (25th) and Alabama (28th).Florida's State and Local Tax Burden Below National Average
Florida's 2009 state and local tax burden of 9.2% of income is below the national average of 9.8%. Florida's tax burden has increased overall from 9.0% (37th nationally) in 1977 to 9.2% (31st nationally) in 2009. Floridians pay $3,897 per capita in state and local taxes.Florida Levies No Individual Income Tax
Florida is among seven states in the country that collect no individual income taxes. Since most small businesses are either S Corporations or partnerships or sole proprietorships, they pay their business taxes at the rates for individuals. This makes the tax environment for small businesses in Florida very competitive compared to other states.Florida's Corporate Income Tax System
Florida's corporate tax structure consists of a flat rate of 5.5 percent on all corporate income, which ranks 39th highest among states that tax corporate income. In 2008, state-level corporate tax collections (excluding local taxes) were $135 per capita and ranked 31st highest nationally.Tax Freedom Day Arrives on April 11 in Florida
Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2011, Florida taxpayers work until April 11 to pay their total tax bill, ranking it 16th highest in the nation. That's one day earlier than national Tax Freedom Day (April 12). The Tax Freedom Days of neighboring states are: Georgia, April 3 (ranked 37th nationally) and Alabama, April 2 (ranked 43rd nationally).Home | Florida S Corp vs LLC | LLC Listed by States | Site-Map
