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Roger
Roger, Attorney
Category: Business Law
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My fianc and I are incorporating in Florida and are 50-50 ...

Customer Question

My fiancé and I are incorporating in Florida and are 50-50 partners in our new business. The business includes providing home finance advice to homeowners, promoting/selling our upcoming book and providing various services, resources, advice and opportunities through our website. Components include: 1) Selling our book through our website (being published and distributed nationally in bookstores) 2.) Providing advice and resources to readers online 3.) Providing assistance to homeowners (through our website and through individual consultation) 4.) Providing additional services to homeowners through various business partnerships 5.) Providing direct philanthropic assistance to homeowners in distress - purchasing our book enables all homeowners to apply for this assistance. Selected homeowners will receive assistance in paying their mortgage, funded by book proceeds and profits from our business partnerships. Which structure –an LLC or S-Corp– would provide protection in all 50 states?
Submitted: 8 years ago.
Category: Business Law
Expert:  Roger replied 8 years ago.

An LLC is the best tool for incorporation. It gives you all of the tax benefits of a corporation (pass-through income taxation), but is much less paperwork intensive; and the best thing is that it gives you absolute protection from individual liability - except for the commission of criminal acts.

All LLCs must have at least one member. LLC members are the owners of the LLC much as shareholders are the owners of a corporation or the partners of a partnership. Like shareholders, a member's liability to repay the LLC's obligations is limited to his or her capital contribution. Members may be natural persons, corporations, partnerships, or other LLCs.

A member's ownership interest in the LLC is called a membership interest. Membership interests are often divided into standardized units which, in turn, are often called shares. Unless otherwise provided for in the operating agreement, a member's right to control or manage the LLC is proportionate to their membership interest.

LLCs are, by default, managed by their members in proportion to their membership interests. Many LLC operating agreements, however, provide for a manager or board of managers to run the day-to-day operations of the LLC. The managers are elected or appointed by members and may also be removed by members. A member may also be a manager, often called the managing member (similar to the managing partner of a partnership).

All LLCs must file evidence of their existence with the secretary of state (or some governmental office) of the state where they choose to be organized. The Articles of Organization serve this purpose and are the LLC version of a corporation's articles of incorporation. Although the specific information that must be included in the Articles of Organization varies by state, all LLCs must disclose their company name (which must conform to rules set forth by the state of organization), appoint a statutory agent and disclose their valid business purpose. The fees associated with filing the Articles of Organization also vary by state.

The Operating Agreement of an LLC is the document most important to its success because it determines, defines, and apportions the rights of the members. Because the various LLC statutes offer so much flexibility (see discussion below), and the default statutory rules do not fit most LLC's needs, Operating Agreements must be drafted carefully and with much discussion and agreement between the prospective members.

Actually, the LLC was created to get away from S-Corps and C-Corps, which can get very complicated.

You can print out the Articles of Organization form online and send them in to the Florida Department of State with the filing fee: http://form.sunbiz.org/cor_llc.html

 

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Customer: replied 8 years ago.
Hi Adam, thank you so much for the information. This supports what we have been reading online.

Here is the heart of our concern: we both currently are business owners. Fiancé = Lending Firm that is S-Corp. I have an advertising and design firm that is an S-Corp as well. Our accountant recommended an LLC for this new business. I was set on an LLC until I read that some states do not recognize LLCs as "black and white" as S-Corps. Here's what I read: "The LLC form of organization is relatively new, and as such, some states do not fully treat LLCs in the same manner as corporations for liability purposes, instead treating them more as a disregarded entity, meaning an individual operating a business as an LLC may in such a case be treated as operating it as a sole proprietorship, or a group operating as an LLC may be treated as a general partnership, which defeats the purpose of establishing an LLC in the first place, to have limited liability (a sole proprietor has unlimited liability for the business; in the case of a partnership, the partners have joint and several liability, meaning any and all of the partners can be held liable for the business' debts no matter how small their investment or percentage of ownership is)"

Because the business is unique in that we are offering advice and also directly helping homeowners financially, we wanted to explore this further. Your thoughts?
Expert:  Roger replied 8 years ago.

I would think that the article you've read is an older publication. LLC's have really become the gold standard all over the US. Even large companies like Georgia Pacific have recently changed from corporations to LLC's.

I really think that you'll be happiest with an LLC.

Customer: replied 8 years ago.
Adam thank you! That set my mind at ease. Thanks for your time and for answering so quickly!
Expert:  Roger replied 8 years ago.
You're welcome. I really think you'll be satisfied with the LLC!

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