As a law firm that specializes in business law, we get a lot of clients who want to start a business. More often than not, we get to work with our clients to create a business plan. When it comes down to the organization management section (and the little three-letter ending attached to the company name), clients always want to know what the difference is between a Florida LLC vs Inc.
LLC
What is it? The three letters “LLC” go at the end of a limited liability company’s name and actually become part of its official name. A limited liability company is a legal entity formed by one or more persons. The owners are called members. It may either be member-managed or manager-managed. It’s a small difference, but a member-managed LLC gives each member (owner) an equal decision-making power.
A manager-managed LLC typically has a limit to the number of members who have the power to make binding decisions on behalf of the company, such as entering contracts. Only the managers have the power to make such decisions or give permission to other non-managing members to make such decisions. The difference may sound small, but it has real significance whenever there is ever a dispute about a decision that the company made.
In addition to its structure, an LLC offers its owners limited liability protection. Contrary to what the name suggests, the liability protection itself is not limited. The protection in fact limits the personal liability of the owners.
Personal liability protection is a huge advantage, because starting a business is a risky after all. When a company does poorly and can’t pay its bills, its without personal liability protection can see their bank accounts and property seized by creditors of the company. This is the main reason we suggest that startups, even with little funding, consider forming an LLC. The small cost of forming the business is nothing compared to the tremendous protection it affords.
What is it? The three letters “Inc.” go at the end of a corporation’s name and actually become part of its official name. A Florida corporation is a legal business entity that is formed by one or more persons. The owner of a corporation is called a shareholder. Shareholders aren’t always just passive investors (think: stock market). They can also have internal company titles and positions, like President or CEO.
A corporation generally has officers and directors. Officers, such as the chief executive officer (CEO), are in charge of the day-to-day operations of the company. The directors are elected by the shareholders of the company. Directors of a smaller corporation may make day-to-day decisions, but typically, as is the case with larger corporations, the directors (or board of directors) is in charge of making the big decisions and delegating management tasks to the officers.
The smaller decisions that the officers make are like negotiating for and entering into contracts. Those decisions won’t make or break a company, but they are still binding on the company. Meanwhile, the bigger internal decisions that the directors make are like whether the company will distribute dividends, when they will distribute them, or whether to merge the company. Those decisions will make or break the company and they are binding on the company.
A corporation, like an LLC, offers personal liability protection. This means that if the company cannot pay its bills, then the creditors cannot look to the owners’ assets to satisfy the outstanding balance. As long as the owners do not “pierce the corporate veil”, their bank accounts and property will be safe from the company’s creditors and other law suit claimants.
If you have any questions about whether you should form a Florida LLC vs Inc or would like to know more about our package services contact Boyer Law Firm today.
