Individuals or company representatives may decide to start a new business for a number of different reasons. Knowing the legal pros and cons of each option could be a major factor in the success of a start-up. Perhaps a company planning a new brand, partnership, revenue stream, territory, product or service may benefit from doing business as a subsidiary, a sister company owned within the same holding group or perhaps under a fictitious name. In the State of Florida, there are a number of different formation options available including the options below:
Limited Liability Companies
While the definition of each business entity type can be found on the official website of Florida’s Division of Corporations, it is highly recommended that anyone seeking to form a new business entity seek professional legal advice. This is due to the number of potential pitfalls related to where the new business will operate, its ownership and the financial and legal ramifications of doing business under each different entity type.
Legal advice from a corporate attorney licensed to practice in Florida will help business owners to determine how to form a new corporate entity based several factors including:
The location or locations where business will be conducted. This may be from one location exclusively, limited to a county or state or within all 50 states or even internationally. Understanding where a company is likely to do business will allow a business attorney legal counsel to advise client on the best option based on local regulations and best practices.
Closely related to jurisdiction is the industry in which a company is going to do business. Is the new entity a real estate brokerage, housing association, marketing agency or a retail location? Is the product or service sold online, in person at a store or restaurant or on the property of a third party. Is the entity subject to state regulations such as those governing security, investigations or recovery agencies? An attorney may have different advice based on the specific requirements of each industry
Entity options are often determined by identity and number of principals a business is likely to have. Individuals seeking to run a company as a sole owner-employee may be advised to set up a different entity than a group of individuals who plan on having an equal stake in the new entity. Often, the presence of non-management ownership or the potential to sell shares in the future as a means of raising investment could greatly affect the ideal structure of a new company. An experienced corporate attorney will be able to take these and other ownership factors into consideration and present the formation option or options that make the best sense for the company ownership.
Owning a business incurs financial expenses that change based on the structure of the company, its profitability, ownership and other factors. For example, federal and state tax liabilities and corporation filing fees vary widely between entity types and ownership structures. One often overlooked source of business cost comes from litigation. Because entity formation and ownership structures affect the liability faced by the entity and the company ownership in the case of a lawsuit, it is important to have a legal professional review the risks before they occur. Knowing how best to structure a new business at the time of initial formation can result in significant financial savings down the line. Alternatively, when a business requires restructuring, it is highly recommended to retain a business attorney to advise on the legal corporate structure and handle the process of business formation.
The Division of Corporations requires the filing of organizational documents based on entity type. Statutory regulations within federal and state law as well as specific clauses within the organizational documents of a specific entity determine what company principals may be called, how they may interact and how they may divide the company. It is important that a legal professional protect the ownership’s rights by drafting and reviewing certificates of incorporation, company by-laws, limited liability agreements and stockholder agreements at the time of formation. Furthermore, the entity type may also affect how daily business operations may be conducted. For this reason, an experienced company counsel will be able to advise on sales contracts, employer/contractor agreements and other documents related to the day-to-day running of a business.
Company formation is an important important business process for which the advice of a legal professional is highly recommended. Remember: every matter requiring business law advice requires its own unique legal assessment. Looking to register a new business? Call us on (954) 900-8885 or contact South Florida Law, PLLC for a free consultation.