Choose an Entity:
Choosing a business entity is an important decision, but usually one that can be changed with some ease, at least early in a company's life- with one important exception: taxes. Always consult with an accountant prior to choosing a legal entity. Achieve Legal can assist in choosing the right entity to avoid personal liability, and based on how to best serve the business owners.
Did you notice that "Sole Proprietership" is not listed as an option to the left? That is because a sole proprietorship is not considered a business entity by most, if not all, governments or courts. What that means is people operating a "sole proprietorship" are really just operating as themselves. People who think they can operate a business without forming an LLC, Corporation or a Limited Partnership, and still escape personal liability by using a d/b/a or fictitious name, or going to be mistaken in most instances.
Most Common Business Entities:
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Sole Proprietorship
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Limited Liability Company a/k/a "LLC"
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Partnership
Reasons for Forming a Business Entity:
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Protection from liability of claims (including debts) created by actions or inactions of the entity
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Accounting reasons- tax minimization
Other than a sole proprietorship, which offers no reliable protection from liaiblity for the individual business owner, the most significant purpose for forming a business entity and in choosing which business entity to operate your commercial venture, is for tax minimization.
How to Form a Business Entity:
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Choose the type of entity: LLC, Corporation or Partnership (you don't want to operate as a sole proprietor as it provides no protedtion).
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File the appropriate documentation with the proper state authority. In Florida, this would be the Secretary of State's Office, Divisision of Corporations.
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Have an attorney draft the appropriate initial business entity governance documents.
Federal Employers Tax ID Number (FEIN/TIN)
After your entity is registered, you need a Federal Employers Tax Identification Number ("FEIN"), otherwise known as a Tax Identification Number ("TIN"). This is similar to a Social Security Number but for your business The FEIN is used by the IRS and financial institutions to identify your company. U.S. banks will require an FEIN for your business before youopen an account.
Licenses & Permits
The State of Florida requires licenses for business and professionals in certain industries or offering certain products or services. To see if you are required to have a state license, check the Florida Department of Busines and Professional Regulation website, or your state's equivalent, for an initial determination. Additionally, your city and/or county may require certain licenses or permits in order to operate. Usually at a minimum, cities require a business license or permit to operate (or a variance).
Annual Registration:
States are going to require to you file an annual registration every year for your entity. Make sure you check, or have your lawyer check, the deadline for the state(s) in which your entity is registered. In Florida, you must file an annual renewal registration between January 1st and May 1st every year. If you miss the deadline, you will be charged a late and/or reinstatement fee.
