With perpetually balmy weather and a strong economy, it comes as no surprise that many want to set up a base in Florida, especially in Miami. In fact, entrepreneurs have been buying properties in the Sunshine State to accommodate the growing population and enjoy a high return on investment.
If you happen to be interested in purchasing your own rental property in the city, creating an LLC is the best way to go. Not only does it enable you to protect your personal assets, but it also makes things easier come tax time.
What is an LLC?
The Balance defines a Limited Liability Company or LLC as a hybrid type of business structure that shares the characteristics of a corporation, partnership, or sole proprietorship. Having an LLC protects you from personal liability in most instances, so in the event that your business gets compromised by way of bankruptcy or a lawsuit, your personal assets like your vehicle, house, and savings accounts will remain untouched.
Additionally, when you have an LLC, your profits and losses can get passed through to your personal income without subjecting you to corporate taxes. The only thing you have to keep in mind is that you and the members of an LLC are considered self-employed and must pay self-employment tax contributions towards Medicare and Social Security.
Anyone who wants their personal assets protected and wish to pay a lower tax rate compared to a corporation will benefit from forming an LLC.
Benefits of creating an LLC in Florida
While you can always form any type of business entity in Florida, creating an LLC is unmatched, especially if you value personal asset protection and flexible management, and want to avoid double taxation and reporting. An LLC separates your business liability and debts from your personal ones, and you will only pay personal taxes instead of both personal and corporate.
Since you will also be creating the operating agreement, you can enjoy utter flexibility. You're not required to have a board of directors or annual meetings—you can only have them when you and your partners agree to it. Plus, compared to corporations, LLC have fewer required meetings and reports, so you don't have to worry much about dealing with bureaucracy.
A quick guide to forming an LLC
The best part is forming an LLC in Florida is very easy. There are essentially only five steps, all of which are a breeze to handle, too. Here is a quick play-by-play to get you familiarized with the process:
1. Name your Florida LLC - Select a name that best represents your company and make sure that it aligns with the state's laws for LLC names and that no other businesses in the state bear the same name.
2. Appoint a registered agent - Having a registered agent is compulsory considering you need someone to receive import state correspondences and legal notices in person. You can choose any person who is a resident of Florida or any business authorized to do business in the state, as long as they have a physical street address.
3. File Florida articles of incorporation - This step makes your LLC official. Once the state approves your paperwork and collects the fee, you can officially call yourself an LLC owner.
4. Create an operating agreement - Talk amongst your partners and decide on the rules of your business to outline the operating agreement. While Florida does not require LLCs to have one, it's necessary if you want to have a document to refer to when making decisions or abiding by in-house regulations.
5. Apply for an EIN - Lastly, if you have employees or building an LLC business with more than one member, you would need an Employer Identification Number or EIN. It's a nine-digit number assigned by the Internal Revenue Service (IRS) that is akin to a Social Security number. Having one allows you to hire employees and apply for business bank accounts once you start running your business.
Article written by Renata Jordan
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