There are a lot of important decisions to make when you are buying a business, but one you may not have considered is choosing the corporate structure. You will need a corporate structure in place before you do many of the licensing/permitting applications that will be necessary for you to officially take over the reins. Your corporate structure also defines who owns the business and how the business will be taxed. 

What are my options?

Corporation

Probably the most frequently used and preferred type of structure for forming a company is the corporation. By presenting the Articles of Corporation to the Secretary of State, you can form a corporation fairly quickly. If you are forming the company in Florida, then the registered office is also in Florida and the corporate structures are governed by the laws of the state of Florida. A corporation formed in Florida can carry out business in every state, although all of the states require a registration. Foreign nationals can also form a corporation in Florida. A registered agent (a person headquartered in Florida) has to be named to receive and deliver documents.

Limited Liability Company (LLC)

The Limited Liability Company is not accepted in all states, but it is in Florida. The shareholders are personally liable for taxation and the accountability is limited to the assets of the business. Just like the corporation, an LLC requires the filing documents to be registered with the Secretary of State. In most cases at least two shareholders are required for a Limited Liability Company.

Sole Proprietorship

If the business is privately owned, it is a Sole Proprietorship. In the majority of cases a single person is the owner of the business. This type of corporate structure does have some downsides. The owner is liable with all of their personal assets and the owner is also liable for taxation.

General Partnership

In this type of corporate structure, the partners lead the business together and all of the partners are absolutely liable for accounts payable. This setup usually requires more administrative effort and can be more cost-intensive.

Limited Partnership

The Limited Partnership consists at least of 2 people, a General and a Limited Partner. The Limited Partner has a supervisory role, both available and limited. He or she can’t be part of the management and acts as an investor. The General Partner leads and is liable for the business. A shareholder contract has to be prepared for the forming of the business. With this type of corporate structure, you have to request a Certificate of Limited Partnership from the Secretary of State.

Before you make a decision it is important to contact a certified public accountant familiar with corporate structures and small businesses, a business attorney or a business broker because they will be able to advise you about what type of structure would be right for the business you want to purchase. Are you a business buyer or budding entrepreneur who would like help? Please feel free to contact us or leave a question here and we will be happy to help or refer you to one of our partners.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com