Marc J. Soss, Esquire (941) 928-0310

Marc J. Soss, Esquire (941) 928-0310Marc J. Soss, Esquire (941) 928-0310Marc J. Soss, Esquire (941) 928-0310
  • Home
  • Practice
    • Practice
    • Estate Planning
    • Same-Sex Estate Planning
    • Business Law
    • Probate
    • MINOR AND SPECIAL NEEDS
    • Asset Protection
    • Elder Law
    • TRUST ADMINISTRATION
    • TRUST LITIGATION
    • Veterans
    • GUARDIANSHIP ADMIN
  • ATTORNEY
    • Attorney
    • Client Reviews
    • IN THE NEWS
    • ARTICLES
  • Contact
  • PAYMENT
  • Sarasota Legal Blog
  • More
    • Home
    • Practice
      • Practice
      • Estate Planning
      • Same-Sex Estate Planning
      • Business Law
      • Probate
      • MINOR AND SPECIAL NEEDS
      • Asset Protection
      • Elder Law
      • TRUST ADMINISTRATION
      • TRUST LITIGATION
      • Veterans
      • GUARDIANSHIP ADMIN
    • ATTORNEY
      • Attorney
      • Client Reviews
      • IN THE NEWS
      • ARTICLES
    • Contact
    • PAYMENT
    • Sarasota Legal Blog

Marc J. Soss, Esquire (941) 928-0310

Marc J. Soss, Esquire (941) 928-0310Marc J. Soss, Esquire (941) 928-0310Marc J. Soss, Esquire (941) 928-0310
  • Home
  • Practice
    • Practice
    • Estate Planning
    • Same-Sex Estate Planning
    • Business Law
    • Probate
    • MINOR AND SPECIAL NEEDS
    • Asset Protection
    • Elder Law
    • TRUST ADMINISTRATION
    • TRUST LITIGATION
    • Veterans
    • GUARDIANSHIP ADMIN
  • ATTORNEY
    • Attorney
    • Client Reviews
    • IN THE NEWS
    • ARTICLES
  • Contact
  • PAYMENT
  • Sarasota Legal Blog

A Lawyer You Can Trust for Business Solutions

Entity Formation | Contracts | Transactions | Solutions

There is no one Florida legal structure that works best for all Sarasota and Manatee county businesses. The most favorable choice depends on a number of factors, including the number of owners, your tax situation, citizenship and whether or not you have employees. As a result, every new Florida business must determine its form of operation: Limited Liability Company, Corporation ("C" or "S"), Sole Proprietorship, or General or Limited Partnership. There are a variety of tax and non-tax considerations that impact this decision. We can assist you with the establishment of your new Sarasota and Manatee county business entity: Limited Liability Company (LLC), Florida Corporation, Florida Partnership, and Florida Limited Partnership (FLP). Continue reading to learn more about the advantages of each type of entity.

MOVING MY BUSINESS TO FLORIDA

PLANNING OPTION

 If you are moving your business to Florida from another state  an “F” reorganization may be the type of reorganization to utilize. It is a type of tax-free reorganization under Internal Revenue Code Section 368(a)(1)(F), which includes a mere change in identity or form of one corporation.  F reorganizations are typically used to effectuate a tax-free shift of a single operating company.  Examples of such changes include a name change, a reincorporation of a corporation in the same or a different state, or a change in the form of business organization. In recent years, the Internal Revenue Service issued final regulations on the qualification of F reorganizations. The elements for a tax-free F reorganization are that there is no gain or loss to the corporation on the transfer of its assets to a new corporation in exchange for stock of the new corporation, and no gain or loss to the shareholders upon the exchange of old stock for new stock.  

FLORIDA LIMITED LIABILITY COMPANY

Corporate Lawyer Sarasota Florida

LIMITED LIABILITY COMPANY (“LLC”):

A Florida Limited Liability Company is formed by filing its Articles of Organization with the Florida Division of Corporations. When establishing a Florida LLC, it is advisable to have at least two members and an operating agreement (see below). Can be either Member-managed or Manager-managed.Liability is

LIMITED LIABILITY COMPANY (“LLC”):

A Florida Limited Liability Company is formed by filing its Articles of Organization with the Florida Division of Corporations. When establishing a Florida LLC, it is advisable to have at least two members and an operating agreement (see below). Can be either Member-managed or Manager-managed.Liability is limited to how much each member puts into the company (personal investment) except for any business debt that is personally guaranteed (business loan or line of credit). Management may be exercised by one or more managers who need not be members or by one or more of the members. The types and number of members are unrestricted unless S-status is elected.







Limited Liability Company Sarasota Manatee County

 Single Member LLC: May elect to have the entity disregarded for tax purposes or to be taxed as a corporation.


Multi-Member LLC: May elect to be taxed either as a corporation ("C" or "S") or a partnership (income is taxed directly to the members). Provides asset protection to each member as a creditor may only obtain a charging lien again

 Single Member LLC: May elect to have the entity disregarded for tax purposes or to be taxed as a corporation.


Multi-Member LLC: May elect to be taxed either as a corporation ("C" or "S") or a partnership (income is taxed directly to the members). Provides asset protection to each member as a creditor may only obtain a charging lien against their ownership interest. An S-corporation election may reduce exposure for federal self-employment tax but also deprive it of certain tax benefits under IRC 754 (allows a partnership a step-up in the tax basis of its assets to their fair market value in the event of the death of a member or subsequent buyouts between members). An S-election may not be advisable when raising capital because of the limitations on the issuance of preferred equity. 


 Personal Liability: A debt, obligation, or liability of an LLC is solely a debt, obligation, or liability of the LLC. A member or manager is not personally liable, by way of contribution or otherwise, for a debt, obligation, or liability of the LLC solely by reason of being or acting as a member or manager. Potential routes to liability for members include (i) written obligation to make future contributions; (ii) 2-year clawback for improper distributions; (iii) responsible person liability for U.S. taxes and for Florida sales or use taxes; or (iv) tortious conduct individually committed by a member or manager. 


florida limited liability Attorney Sarasota

 Operating Agreement: Outlines each owner's (i) responsibilities, (ii) share of the profits, (iii) who may be a member of the entity, (iv) what happens if a member desires to leave, and (v) what happens when a member passes away. 


Tax: The taxation of a Florida Limited Liability Company interest is determined by how the LLC elects to be t

 Operating Agreement: Outlines each owner's (i) responsibilities, (ii) share of the profits, (iii) who may be a member of the entity, (iv) what happens if a member desires to leave, and (v) what happens when a member passes away. 


Tax: The taxation of a Florida Limited Liability Company interest is determined by how the LLC elects to be taxed. A single-member LLC will be taxed as a disregarded entity and its sole member and considered to be self-employed and subject to tax on the net earnings of the LLC (the same as a sole proprietorship). A multi-member LLC that is taxed under the default classification of a partnership will also have its members classified to be self-employed and subject to tax on the net earnings of the LLC. In contrast, an LLC that elects to be taxed as a corporation (a C corporation or S corporation election) may have its member paid as an employee (subject to withholding) of the LLC. 

florida limited liability Attorney Sarasota

  Fiduciary Duties Under Florida Law

Under Florida’s Revised Limited Liability Company Act, the fiduciary obligations of LLC members are outlined in Florida Statute § 605.04091. In a member-managed LLC, members owe duties of loyalty and care to both the company and, under certain circumstances, to fellow members.


Duty of Loyalty

The duty of 

  Fiduciary Duties Under Florida Law

Under Florida’s Revised Limited Liability Company Act, the fiduciary obligations of LLC members are outlined in Florida Statute § 605.04091. In a member-managed LLC, members owe duties of loyalty and care to both the company and, under certain circumstances, to fellow members.


Duty of Loyalty

The duty of loyalty requires members to act in a manner that serves the best interests of the LLC. Specifically, this duty prohibits:

  • Self-Dealing: Engaging in transactions with the LLC that benefit a member personally at the LLC’s expense unless such transactions are fair and properly disclosed and approved.
  • Usurpation of Business Opportunities: Taking business opportunities that belong to the LLC for personal gain, including diverting potential clients, contracts, or assets.
  • Competition with the LLC: Competing with the LLC’s business while remaining a member, unless explicitly permitted by the operating agreement.
  • Misuse of LLC Assets: Using LLC funds or property for personal benefit without authorization.
  • Confidentiality Violations: Disclosing or misusing sensitive LLC information for personal advantage.



sarasota florida limited liability Attorney Sarasota

 Duty of Care

The duty of care requires members to act with the diligence and prudence that a reasonably prudent person would exercise in a similar position. This includes:

  • Informed Decision-Making: Basing decisions on adequate information and deliberation.

 Duty of Care

The duty of care requires members to act with the diligence and prudence that a reasonably prudent person would exercise in a similar position. This includes:

  • Informed Decision-Making: Basing decisions on adequate information and deliberation.
  • Reasonable Inquiry: Conducting due diligence when potential conflicts or risks arise.
  • Oversight Responsibilities: Ensuring the proper management and governance of the LLC.
  • Compliance with Legal Obligations: Operating within the bounds of applicable laws and regulations.


Modifying or Limiting Fiduciary Duties

Florida law allows members to modify certain fiduciary duties through a well-drafted operating agreement under Florida Statute § 605.0105. However, these modifications cannot eliminate core obligations such as good faith, fair dealing, or liability for willful misconduct or gross negligence. Members may:

  • Waive liability for ordinary negligence, but not for acts of bad faith or intentional misconduct.
  • Define specific conflict-of-interest rules, permitting certain transactions that would otherwise be considered self-dealing.
  • Clarify the scope of competition restrictions, allowing members to engage in business ventures outside the LLC under certain conditions.


A carefully structured operating agreement is essential in balancing flexibility and legal protections, particularly for sophisticated business owners who wish to tailor their rights and obligations.

Sarasota Attorney LLC Florida

  Remedies for Breach of Fiduciary Duties

When a member breaches their fiduciary duties, Florida Statute § 605.0601 provides mechanisms for enforcement. Remedies for breach include:

  • Dissociation: The wrongful member may be forced to withdraw from the LLC. In the event of dissociation, the LLC may buy back the member’s interest, or the membe

  Remedies for Breach of Fiduciary Duties

When a member breaches their fiduciary duties, Florida Statute § 605.0601 provides mechanisms for enforcement. Remedies for breach include:

  • Dissociation: The wrongful member may be forced to withdraw from the LLC. In the event of dissociation, the LLC may buy back the member’s interest, or the member may be required to sell it to other members, depending on the terms of the operating agreement.
  • Judicial Dissolution: In severe cases, a court may order the dissolution of the LLC. This is typically a last resort and can arise when a breach causes irreparable harm to the LLC or its members. The court may also issue orders for the equitable distribution of assets if necessary.
  • Legal Damages: The harmed party may seek financial compensation for losses incurred as a result of the breach. These damages may include actual losses suffered by the LLC or its members due to the breach, as well as punitive damages in cases of willful misconduct or gross negligence.
  • Injunctive Relief: A member may seek a court order to prevent further breach or to compel the breaching member to take corrective actions. This remedy may be particularly relevant when a member’s actions jeopardize the LLC’s business opportunities or assets.

C - CORPORATION:

A Florida corporation subject to tax as a separate legal entity (double taxation). Dividends (distributions out of earnings and profits) are subject to tax at the shareholder level. Shareholders are not personally liable (unless they issue a guarantee) for corporate obligations. Managed and controlled by its officers and directors.

S – CORPORATION:

A pass-through Florida legal entity with no corporate-level tax. After the corporation is formed, all the stockholders must sign and file Form 2553 with the Internal Revenue Service (“IRS”) within seventy-five (75) days of the formation date to elect S-Corporation treatment for tax purposes. Shareholders report and pay tax on their pro-rata share of income, losses, deductions, etc. Stock owners reduce his/her tax bill by paying themselves a reasonable salary (subject to payroll taxes) and a dividend (distributed free of employment tax). Shareholders are subject to tax on net recognized built-in gain during a 10-year recognition period after S corporation status takes effect. The entity may only have one (1) class of stock (nonvoting stock is not deemed a second class of stock) with identical rights to distribution and liquidation proceeds and less than one hundred (100) shareholder (no corporation, partnership, or LLC). Special Shareholder Rules: (i) not more than one hundred (100) shareholders; (ii) every shareholder must be an individual (other than a non-resident alien), an estate, an eligible trust, or certain tax-exempt organizations; (iii) the personal assets of a shareholder will not be subject to any legal claim or judgment simply by virtue of being a shareholder. A husband and wife and all lineal descendants and their spouses are treated as a single shareholder.

S-Status: Must be elected by all shareholders within seventy-five (75) days of the formation date or any time during the preceding taxable year. The election may be revoked only with the consent of shareholders owning more than half (1/2) of the corporation’s stock on the day of the revocation. An S-election will reduce exposure for federal self-employment tax and state entity-level tax.


Tax Return: Files IRS Form 1120S and reports on the Schedule K-1 the amount of income, loss, deduction, etc. allocated to the shareholders.

SOLE PROPRIETORSHIP:

Not a separate Florida legal entity. No formation requirements are necessary. Income earned by the business (less expenses) is taxed directly to the owner. The owner is liable for all of its debts and receives no personal liability protection. The owner will have complete control over the business and its operation.

COMPARISON OF LLC AND CORPORATION:

Owners

Creditor Protection

Governance

Corporation

 "shareholder" who holds "shares of stock" in the entity


Limited Liability Comp

 "member" or "interest owner who holds "interest" or a "membership" in the LLC


 Number of Shareholders / Members


Corporation: Limited to 100 shareholders and restrictions Limited Liability Comp: No limitations on the number or types of owners  

Governance

Creditor Protection

Governance

Corporation

"directors" and "officers"


Limited Liability Comp.

"managers" or "company officials"


 Corporation Annual and Special meetings


Limited Liability Comp. No meetings required 



Creditor Protection

Creditor Protection

Creditor Protection

Corporation

Judgment creditor of a shareholder can foreclose on the shareholder's shares and take ownership of them


Limited Liability Comp.

Judgment creditor against a member's interest can only get a "charging order"

Sarasota Business Law Attorney

WHAT TO AVOID:

The following is a brief list of the many factors that must be avoided in the State of Florida to prevent a creditor from piercing the entities corporate veil and pursuing collection from its shareholders or members:


  1. Debt is intentionally and knowingly incurred when the entity is insolvent;
  2.  Annual shareholder, the board of directors’ or membership meetings are not held and/or other corporate formalities are ignored;
  3. Corporate records are not maintained;
  4. Shareholders/members use corporate funds for personal reasons, thereby endangering the entities financial stability;
  5. Commingling of corporate activity and/or funds and those of the person or persons who control the entity; and
  6. A failure to maintain separate offices, the company has little or no other business and is only a facade for the activities of the dominant shareholder/member who is, in fact, the corporate “alter ego.”

Corporate Lawyer Sarasota Florida

PIERCING THE CORPORATE VEIL

When a corporation or limited liability company becomes insolvent, the business owner often is worried that the creditors will try to "pierce the veil" of the entity and sue the individual owner for all the business’s debts. Florida courts have made it difficult for creditors to pierce the veil of a corporation or LLC to hold owners responsible for corporate obligations. Creditors who contract with a business entity could pierce the veil and sue the owners only if they show that (i) the corporation or LLC was established for an illegal purpose, or (ii) if the owners were using the corporation to evade what is really a personal obligation (e.g., using a corporation to incur debt to personal consumption). Most successful efforts to pierce a corporate veil occur when a "mom and pop" business owner intermingles personal and business finances, such as when they pay personal bills from a corporate account. The corporate veil is pierced in that case because the corporation is the legal alter-ego of the controlling owner. There is a famous Florida Supreme Court case on piercing the corporate veil called the Dania Jai-Alai case.

CORPORATE LAW ARTICLES

Every new business upon commencement must determine its form of operation (pdf)Download
FORMER BRADENTON BUSINESSMAN APPEARS IN PANAMA PAPERS DATABASE (pdf)Download

Marc J. Soss, Esquire

This website has been prepared for informational purposes only and does not constitute legal advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction. The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask me to send you free written information about my qualifications and experience. 

Copyright © 2020, Marc J. Soss, Esq. All Rights Reserved.

Powered by

  • Home
  • Practice
  • Attorney
  • Contact
  • PAYMENT