Business and Tax Lawyer Blog

So you've taken a great idea, formed a plan, created a blueprint for how to get the attention of your customers and acquired the appropriate amount of start-up funding. Now you face your next big decision - what type of business organization is best for you? Possible organization structuring can include partnerships, corporations, sole proprietorships and limited liability companies. There are key differences between these structures that can impact your business' management, your taxes and your day-to-day operations.

Sole Proprietorship:
A Sole Proprietor is, basically, you. You may elect to operate your business under your own name or under a descriptive "new" name. The descriptive new name can be linked to you by the filing of a Fictitious Business name with Florida's Secretary of State. While the Sole Proprietorship structure is the simplest and least bureaucratic form under which to operate a business, it fails to protect your personal individual assets from litigation/claims by unhappy business customers, vendors or guests or from the debts of the business.

Partnerships:
A "partnership" is typically an agreement between two or more people to finance and operate a business. The "creation" document is generally referred to as a Partnership Agreement. Partnerships, unlike sole proprietorships, are a legally separate entity from the partners themselves. Contractual obligations are made with the entity, not the individual partners. Taxation does not occur at the entity level, but rather is passed through to the partners. With regard to liability for claims by unhappy business customers, vendors or guests, or claims against you for business debts, the partnership structure does not protect the partners from personal liability for the obligations and debts of the business. The partners share responsibility and authority regarding operating the business. However, partners have the flexibility to define their relationship among one another and are permitted to split the ownership and profits of the partnership in the way they desire. Partners can also share equity interests - ownership interest in the partnership, which helps in building capital. As partnerships are based on a shared ownership concept, the actions of one partner can bind the whole partnership.

Corporations:
Florida corporations are created under Florida law and basic "creation" documents generally include the Articles of Incorporation and the Bylaws. The basic attributes of a corporation and what distinguishes a corporation from other business organizations include: (1) limited liability of the corporation's directors, officers and managers and (2) a corporation's potential for perpetual existence (the corporation exists independent of the lifetimes of its directors, officers, etc.). The corporation can initiate a legal suit, as well as be sued. The corporation may also have the status as a separate tax payer. Many of these attributes are considered advantages of this form of business organization. However, the multiple levels of management (shareholders, directors and officers) will present certain administrative requirements for you in operating the business.

Limited Liability Companies:
The basic "creation" documents for a Florida Limited Liability Company (or "LLC") will include the Articles of Incorporation and the Operating Agreement. The management structure of the entity is designated in the Operating Agreement. The owners of the LLC are called members. Liability of members of the LLC is generally limited to each member's investment in the LLC. An exception to that protection from personal liability can arise in the event an individual member engages in unlawful actions in relation to a claim against the LLC.

If you are thinking about starting a business, contact Wood, Atter & Wolf, P.A., to speak with a business attorney and discuss the advantages and disadvantages of the various business organizations.

With Florida unemployment rates at high levels, many displaced employees – executives as well as workers – are examining opportunities to start their own businesses. Deciding on the right structure for that business is an important step in starting the new business off on the right footing.

The proper structure – LLC, corporation, partnership or sole proprietorship – depends on what kind of products or services your business will provide, the owner's appetite for structure and their financial situation. Here are some factors to consider when choosing a business ownership structure:

Complexity – if you are starting your business without a lot of capital and will be essentially operating on a shoestring in the beginning, you may wish to choose a simple structure, like a sole proprietorship or partnership. Corporations and LLCs are more complex corporate structures and more expensive to maintain, requiring careful record keeping and certain operational formalities.

Risk – if you are operating an inherently risky business – for example, trading stock or involved in construction – you will probably want a structure that provides personal liability protection to shield your personal assets from the risk of business claims. A multi-member limited liability company (LLC) or corporation provides this kind of protection. The law in this area (especially with regard to the LLC structure) will be in a state of flux for a period of time due to a 2010 case as to a Florida LLC's ability to shield your business from personal claims. Likewise, a standard corporation will also provide protection from liability.

Taxes – taxes on business profits for partnerships, LLCs and sole proprietorships are all reported the same way: on the personal income tax returns of their owners, who must pay income taxes on all net profits. A corporation may file an S-Corp election to receive the same tax treatment; otherwise corporations pay corporate taxes at special rates on any profit at year's-end.

Raising Capital – a corporate structure allows you to sell shares in your business to raise investment capital. You also may raise capital through bank loans, SBA loans and other government loans as well as from entrepreneurial groups investing in your business.

If you are considering starting your own business and need information on your structure options, contact our Jacksonville, Florida business and tax law firm.

The Beaver Street Enterprise Center is a small business incubator that opened its doors in Jacksonville, Florida in 2003. It was established by the nonprofit group, FreshMinistries, to nurture small businesses by providing entrepreneurs with reasonably priced office space, mentoring services and opportunities for networking with other business owners.

In the incubator’s first year, fifteen fledgling businesses provided jobs for sixty two Floridians. By 2007, the center’

s businesses provided almost five hundred jobs to Florida residents, most of them from Jacksonville. The total revenue produced by these businesses has grown to close to $10 million.

Successful businesses to come out of the incubator include A. Harold & Associates, Xeye, Inc., and a Burger King Franchisee who owns six Burger King stores. The University of North Florida’s Small Business Development Center also has a presence there. Most come for the $10 per square foot office rent, but stay for the networking and relationships. Entrepreneurs credit the center with providing them the focus they need to build their businesses, the contacts with other business owners who can provide guidance, and the opportunity to meet local bankers who can help finance their operations.

The Beaver Street Center is currently home to fifteen small business tenants, and has room for two more. The Center also supports fourteen home-based businesses with shared office space, equipment and training. In addition, the Jacksonville Hospitality Institute offers a nine-week course, held in the Center, which prepares students for a career in hotels or restaurants.

Find out more about this small business incubator at Jacksonville small businesses get chance to grow on Beaver Street.

If you live in the Jacksonville, Florida or Orlando, Florida area and run a small business, please contact Wood, Atter & Wolf, P.A. for business legal counsel.

Arguably the most versatile of the forms, the LLC is somewhat of a hybrid, in it allows for the management flexibility of a general partnership, but features the limited liability of a limited partnership. LLCs can be member-managed or manager-managed and no personal liability on behalf of the entity attaches. LLCs are taxed either pass-through or as a corporate entity. Florida requires the filing of articles of organization for LLCs.

The advantages of an LLC include: no shareholders, the option to operate like a partnership or elect one managing member, no personal liability for any of the members, and the option to choose tax treatment.

Before registering a business, every new business owner is confronted with the task of deciding what business form/entity to use.

Well, the basic common business forms come in 6 flavors. They are the sole proprietorship, the general partnership, limited partnership, limited liability partnership (LLP), limited liability company (LLC), and the Corporation.

This is the first in a seven-part series, where I will provide a brief introduction to the options that best suits a business owner's needs.

In Jacksonville and northeast Florida we have just about all of them—McDonald's, Starbucks, and Dunkin Donuts; I am talking about the major franchises in the growing business of selling specialty coffee drinks. Recently, I posted a blog on succeeding in difficult economic times by finding a niche (Lucrative Niches +Established Marketplaces =Better Chances for Franchise Success). In that blog I explained that one way to be successful in a tough economy is by finding a niche that separates your company from the other businesses in the same market.

In this blog I would like to show you how the few franchisors I already listed, along with Tim Hortons and Caribou Coffee, a couple of the other major players in the specialty coffee market (neither of which have locations in Jacksonville), use their niches in the coffee and food chain restaurant business to compete. Here is a brief explanation of what helps each of them succeed in garnering a portion of the market share.

McDonald's, the largest franchisor, uses its buying power to provide the product at a slightly cheaper price and sells it along with its wide array of breakfast and burger meals.

Starbucks is probably the originator of the specialty coffee boom, so it can rely on the fact that it was the first in the market and that it is primarily a high-end coffee business.

Dunkin Donuts combines its primary product, donuts, with coffee to reach its particular market, and prior to Tim Horton's entering the marketplace, Dunkin Donuts, was the only one of these businesses offering its customers a wide array of donuts. Dunkin Donuts has recently added breakfast sandwiches in order to compete with McDonald's and Tim Hortons.

Tim Hortons, like Dunkin Donuts, sells a wide variety of donuts, but it also sells breakfast sandwiches and other foods, including soups and lunch sandwiches.

Caribou Coffee, the only other primarily high-end coffee focused chain besides Starbucks, competes by selecting smaller unexploited markets to locate its stores, avoiding direct competition with Starbucks.

Whatever your business is, you can still find a way to compete in a crowded market by finding your niche. Drop me an e-mail and let me know what you think. As always, I look forward to hearing from you