Question 1

What is a limited liability company (LLC)?

Accepted Answer

An LLC is a business entity that combines the liability protection of a corporation with the tax flexibility of a partnership. In Florida, LLCs are governed by the Florida Revised Limited Liability Company Act (Chapter 605). Key features: members (owners) are not personally liable for the LLC’s debts, the LLC can be taxed as a sole proprietorship (single-member), partnership (multi-member), or corporation (by election), management can be member-managed or manager-managed, and the operating agreement governs internal operations. LLCs are the most popular entity choice for Florida real estate investors and small businesses because they provide liability protection without the formalities of a corporation.

Question 2

How is a Florida LLC taxed?

Accepted Answer

Tax treatment: Florida has no state income tax on individuals, which benefits LLC members. For federal tax purposes: single-member LLC: disregarded entity (reported on the member’s personal return, Schedule C or Schedule E), multi-member LLC: taxed as a partnership by default (Form 1065; each member receives a K-1), or the LLC can elect: S corporation taxation (Form 1120-S; may reduce self-employment tax for active members) or C corporation taxation (Form 1120; double taxation but may benefit from the 21% corporate rate). Florida-specific: the LLC may owe Florida sales tax (if selling taxable goods or services), tangible personal property tax (on business equipment), and documentary stamp taxes (on real estate transfers).

Question 3

What is the difference between a Florida LLC and a corporation?

Accepted Answer

Key differences: liability protection is similar (both protect owners from personal liability), taxation differs (LLC: pass-through by default; corporation: double taxation unless S election), management flexibility differs (LLC: flexible, governed by operating agreement; corporation: formal structure with board of directors, officers, shareholders), ownership transfer differs (LLC: membership interests transferred per operating agreement; corporation: stock freely transferable), and formalities differ (LLC: fewer formalities; corporation: annual meetings, minutes, resolutions required). For Florida real estate, LLCs are generally preferred because: the operating agreement can be customized for each property, pass-through taxation avoids double taxation, and the charging order protection (Section 605.0503) limits creditors’ access to the LLC’s assets.

Limited Liability Company (LLC)

Limited Liability Companies (LLC)

Key Features

Taxation

vs. Corporation

Related Terms

Barnes Walker Business Law

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