Choosing a Business Entity
Several types of business entities are possible in Florida, including Limited Liability Companies ("LLCs"), C Corporations, S Corporations, Partnerships and Sole Proprietorships.
A clear understanding of both personal and business goals is needed to help make the choice between business entities clearer.
A business lawyer can help a new business owner choose the correct corporate entity for his or her needs.
S Corp Versus C Corp
An S Corp is taxed differently from a C Corp, so one should carefully choose which corporation to form.
With an S Corporation, taxes are not paid at the corporate level. Instead, taxes "pass through" the business and all profit or loss is assigned to the owner of the business, where he or she is taxed as an individual.
Unlike S Corporations, C Corporations do pay taxes at the corporate level. One drawback with C Corporations is the possibility of double taxation, whereby income is taxed as the corporation earns it, and again as the business owners are paid and taxed on an individual level.
Choosing an LLC Business Structure
A Limited Liability Company (LLC) can protect a business owner's personal assets from debts that the business incurs. This protection, while not perfect, is often a primary reason for a business owner to form an LLC.
Uniform LLC laws, adopted in Florida and nationwide, limit how creditors can seek redress against the owners of an LLC. For example, if an employee were to be injured at an LLC-owned workplace, and awarded a large sum of money in a civil lawsuit, the personal assets of the LLC's owners could not be seized in order to pay the judgement.
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Do Contracts Need to be in Writing?
It's true: one can have a legally binding, enforceable contract that is oral - spoken only - and not put in writing. While not true for every type of contract - for example, in Florida, contracts pertaining to the sale of real estate must always be written - for most business matters, two or more parties may agree to a contract orally.
But oral contracts are problematic: they are difficult to enforce, with the terms and conditions of the contract ripe for misunderstanding by each party. If a contract dispute arises, how will it be known, or proven, who is in breach of contract?
Written contracts, therefore, are overwhelmingly in use by the business community. A written contract can clearly identify the terms and conditions which the parties are agreeing to, and even stipulate what is to occur in the event of a breach.
Drafting Contracts and Legal Documents
Many types of business contracts exist - all are designed so that two or more parties can enter into an agreement that clearly spells out the expectations of all parties, and which is legally enforceable. Here are just a few common examples:
Nondisclosure Agreements can be used to bar a vendor, new hire, former employee or anyone from disclosing key information about a business, and outline a legally enforceable condition if the other party violates the agreement.
Promissory Notes are often used to stipulate the terms by which borrowed money is repaid.
Partnership Agreements clearly outline the roles of those operating a business, and can specify details such as compensation and decision-making authority.
An Employment Agreement is used to outline the terms of an individual's employment, and will usually cover topics such as compensation and causes for termination.
Licensing Agreements allow one party to utilize the intellectual property of another for business purposes. Such agreements usually contain compensation details and restrictions on how the property can and cannot be used.
Power of Attorney allows an individual to make legal and financial decisions on someone else's behalf.