West Palm Beach Business Attorney Discusses Business Entity Formation

When forming a business in Florida, you need to be sure to follow all laws and procedures. Our West Palm Beach business attorney gives an overview of what you need to know and if you find you need help, our business law attorney in West Palm Beach – Stacey Griffiths Esq. – can help!

If you are forming a new business, understanding all of the legal aspects, advantages, and disadvantages of the various types of business formations available under Florida law is vitally important, because how the business is structured will have personal liability and tax consequences for the business owners.

The four main types of business entities are sole proprietorships, partnerships, limited liability companies, and corporations. Let our West Palm Beach business attorney explain…

Businesses can be formed using a variation of one of these general types:

Sole Proprietorship

A sole proprietorship is an unincorporated business owned and run by one individual with no distinction between the business and the owner. The owner is entitled to all profits and is responsible for all the business’ debts, losses, and liabilities. Because the owner and the business are one and the same, the business itself is not taxed separately–the sole proprietorship income is the owner’s income.

You do not have to take any formal action to form a sole proprietorship. As long as you are the only owner, this status automatically comes from your business activities. But like all businesses, you need to obtain the necessary licenses and permits. Regulations vary by industry, state and locality. If you choose to operate under a name different than your own personal name, you will most likely have to file a fictitious name (also known as an assumed name, trade name, or DBA name, short for “doing business as”). You must choose an original name; it cannot already be claimed by another business.

Partnership

A partnership is a single business where two or more people share ownership. Each partner contributes to all aspects of the business, including money, property, labor or skill. In return, each partner shares in the profits and losses of the business. Because partnerships entail more than one person in the decision-making process, it’s important to discuss a wide variety of issues up front and develop a legal partnership agreement. This agreement should document how future business decisions will be made, including how the partners will divide profits, resolve disputes, change ownership (bring in new partners or buy out current partners) and how to dissolve the partnership. Although partnership agreements are not legally required, they are strongly recommended and it is considered extremely risky to operate without one.

Types of Partnerships

There are three general types of partnership arrangements:

 • General Partnerships assume that profits, liability and management duties are divided equally among partners. If you opt for an unequal distribution, the percentages assigned to each partner must be documented in the partnership agreement.

• Limited Partnerships (also known as a partnership with limited liability) are more complex than general partnerships. Limited partnerships allow partners to have limited liability as well as limited input with management decisions. These limits depend on the extent of each partner’s investment percentage. Limited partnerships are attractive to investors of short-term projects.

• Joint Ventures act as general partnership, but for only a limited period of time or for a single project. Partners in a joint venture can be recognized as an ongoing partnership if they continue the venture, but they must file as such.

    The way in which a partnership is formed and the way a dispute between partners is resolved could determine the life or death of a business.

Corporations

A corporation (C Corp) is an independent legal entity owned by shareholders. This means that the corporation itself, not the shareholders that own it, is held legally liable for the actions and debts the business incurs. Corporations are more complex than other business structures because they tend to have costly administrative fees and complex tax and legal requirements. Because of these issues, corporations are generally suggested for established, larger companies with multiple employees. For businesses in that position, corporations offer the ability to sell ownership shares in the business through stock offerings. “Going public” through an initial public offering (IPO) is a major selling point in attracting investment capital and high quality employees.

Forming a Corporation

A corporation is formed under the laws of the state in which it is registered. To form a corporation you’ll need to establish your business name and register your legal name with your state government. If you choose to operate under a name different than the officially registered name, you’ll most likely have to file a fictitious name (also known as an assumed name, trade name, or DBA name, short for “doing business as”). State laws vary, but generally corporations must include a corporate designation (Corporation, Incorporated, Limited) at the end of the business name.

To register your business as a corporation, you need to file certain documents, typically articles of incorporation, with your state’s Secretary of State office. Some states require corporations to establish directors and issue stock certificates to initial shareholders in the registration process. Once your business is registered, you must obtain business licenses and permits. Regulations vary by industry, state and locality.

Start your business off right with the proper business entity formation. Speak with Stacey Griffiths Esq., business law attorney in West Palm Beach. 

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