Posted by: Garcia & Cuadra, PA | July 23, 2012

Florida Limited Liability Company

Effective January 1, 1997, the simplification of entity classification rules 26 CFR parts 1, 301 and 602 became effective. With the simplification rules there is now no longer a need to avoid corporate characteristics with the limited liability company. 

If a limited liability company has satisfied IRS requirements, it can be treated as a partnership for federal tax purposes. As such, the LLC is required to file the same federal tax forms as a partnership and takes advantage of the same benefits. In addition to the pass-through taxation of a partnership, LLCs are also able to take advantage of the tax allocation methods of partnerships.

Partnerships and LLCs specify in their partnership or operating agreement how the profits and losses of the company will be allocated among the members. This allows members to customize their allocations and not base them solely upon the percentage of ownership they posses in the company.

Profits and losses from the LLCs are passed through to the members and reported on their individual income tax forms and paid at their individual rates.

Florida required record keeping

  • List of the names and addresses of all members
  • List of members’ cash and other contributions if not already included in the Articles of Organization
  • Copy of the Articles of Organization and all Amendments
  • Copies of federal, state, and local income tax returns and financial statements for the past three years

Note: Under the Florida Act, a new member may be admitted to the limited liability company only with the unanimous consent of all other members.

1. What is the advantage of an LLC over an S Corporation or general corporation?
The S corporation’s special tax status eliminates double taxation, but it lacks flexibility in allocating income to the owners. In addition, LLCs have no ownership restrictions. An S corporation limits the number of owners to 75 and prohibits corporate and foreign ownership. General corporations are taxed twice on their income: Once at the corporate level and again at the personal level.

2. Why are foreign entrepreneurs attracted to LLCs versus other business structures?
If the LLC does not earn income within the U.S., and receives no income from U.S. business, these foreign owners are normally not subject to U.S. federal income tax.

3. After the Florida Secretary of State filed the Articles of Organization, what is the first step?
The first meeting of the company members, called the organizational meeting, should be held as soon as possible. At this time, company members determine the operating agreement, elect managers, and if necessary, address any business that needs attention.

4. What is a resident agent and why does my Limited Liability Company need one?
A resident agent is someone who resides within the state of formation (Florida). The resident agent is responsible for accepting official notices from the Secretary of State and service of process in the event that the organization is sued in Florida. Florida law specifies that all LLCs formed in Florida have a Florida resident agent.

5. Do I own my Limited Liability Company Name?
Pursuant to section 608.406(2), the name of the Limited Liability Company shall be filed with the Department of State for Public notice only and shall not create any presumption of ownership beyond that which is created under common law. The Department of State shall record the name without regard to any other name recorded.

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