When starting a new business in Florida, you need much more than a great idea and a business plan; there are numerous legal considerations that can have a huge impact on the day-to-day functioning, and ultimately the success of any new business. In this 4-part series, we will walk you through our roadmap for successfully starting and operating a business from a legal perspective.

In this first segment of our 4-part series we will be discussing all of the different steps needed to formally organize and set up your business. In the next segments we will focus on getting you ready for opening day, on different ways to act now to avoid business disputes in the future, and finally our ultimate checklist for starting your business on the right foot.

This 4-part series is a collaboration between Robert N. Pelier, P.A. and Aymee C. Gonzalez, P.A.; Coral Gables business attorneys dedicated to serving business owners and entrepreneurs in every step of their journey.

PART 1: ORGANIZING YOUR BUSINESS

If you’ve decided to go into business for yourself, you have likely already decided what the business will be, what sort of business model you will follow, and hopefully you’ve drafted a business plan. These steps are crucial, but if that’s all you’ve done, then from a legal perspective you haven’t even started. Here are the 4 main steps you need to take in order to fully organize your business and prepare to open:

Choosing the legal form of the business

One of the first major decisions you need to make, from a legal perspective, is to decide what sort of entity you would like your business to be, the most common are: partnerships corporations, and LLCs. This decision will affect your personal liability, how you are taxed, what documents you need to file, and much more.

Partnerships: Partnerships allow two or more individuals to own a business together; this is a simple and straightforward way to set up a business with multiple owners. There are several different types of partnerships, it is crucial that you and your partners understand the implications of the type of partnership you select. One of the most important considerations when choosing a form of partnership, is understanding how each type affects your and your partner’s ability to make decisions that bind the corporation, and your personal liability for partnership decisions and debts. You need to be sure that you select the right type of partnership, one that affords the protections that you need.

Corporations: Corporations are distinct legal entities completely separate from their owners. Corporations act as legal “persons,” they are able to independently enter into contracts, sue and be sued, and own assets. Corporations are “owned” by their shareholders, who are not liable for debts and actions of the corporation, and are run by a Board of Directors. Like partnerships, there are different types of corporations, understanding and choosing the right type is crucial.

LLCs: LLCs, or limited liability companies, are owned by Members and may be run or operated either by its Members or by certain individuals called Managers. LLCs can be thought of as sort of a hybrid between partnership and corporations. LLCs generally provide the crucial liability protection provided by corporations, while also giving you much of the flexibility as partnerships. Like corporations, the assets of an LLC are separate and apart from the assets of its members, providing protection in the event of lawsuits or bankruptcy. However, LLCs are not subject to the same formalities required of a corporation.

There are a variety of different legal entities you can choose from. Selecting the right entity is immensely important, many aspects of the day-to-day running your business will be affected by this choice. We have provided a brief overview of the main types of entities and a few notable characteristics of each, however, there are many other important aspects and characteristic of each type of entity which should be considered. We suggest you reach out to an experienced attorney to discuss which business form is right for you.

Picking a name

This sounds awfully basic, but it may be more complicated than you have anticipated. Although you may have a name in mind, you have to ensure that there are no other entities already registered and operating under your chosen name. We suggest that you select at least three possible names, and then perform a search through the Florida Division of Corporations to ensure that the name is available. Once you know the name is available in Florida, you’ll need to ensure that the name is not being used in a different state. If the name you’ve chosen is already in use you will not be able to register your business with the state, nor will you be issued a federal tax ID number.

Registering your business

Your next step should be to register your business with the State, here in Florida you must register with the Florida Division of Corporations. You can also consider registering your business in a different state, in order to take advantage of any favorable laws or taxation schemes in that state. For instance, many companies choose to register their business in Delaware, to take advantage of the modern, flexible and robust laws and judicial decisions that govern Delaware businesses. Regardless of where you decide to register the business, you will have to file certain documents: If you are forming a corporation you will have to file Articles of Incorporation, if you are forming an LLC, then you will file Articles of Organization. The information you will have to provide will vary depending on the type of entity you are forming. Generally, however, you will need to provide the name of the business, an address for the business, list the “owners” (which may be termed shareholders, principals, members etc. depending on the type of entity), and choose a Registered Agent and Registered Office. The registered agent is the person authorized to receive official documentation on behalf of the business, including accepting service of process in the case of a lawsuit, this person must be available at the registered office during working hours.

In addition to registering the business with the state, you may also need to apply for a federal tax ID number. This number is utilized by the federal government for tax purposes, as well as allows you to open a bank account in the name of the business. Lastly, you will need to determine if your county or city (or possibly both) require you to obtain occupational licenses in order to operate within their jurisdiction. You will need to apply for the license, which usually includes a fee and maintain this license from year to year.

Preparing organizational documents

A crucial step to starting your business is to draft detailed documents which outline the day to day functioning of your business. For a corporation this means drafting your corporate By Laws, for an LLC this means creating an Operating Agreement; but generally, it means the same thing, drafting a set of guidelines and procedures that will guide the functioning of your business. These guidelines can and should cover every part of operating your business, including division or distribution of profits and ownership interests, division of responsibilities and duties, the hiring of employees or contractors, and much more. Defining these aspects

of your business will prevent drawn out and costly business disputes in the future.

In order to properly prepare these documents, it is important to understand the legal framework of the business entity you have chosen. Many business entities are creatures of statute, meaning that laws exist that govern how they must be run, and what owners can and cannot do. However, many of these statutes simply provide the default rule for business governance. This means that your foundational documents can be crafted in such a way as to either embrace the default statutory rule or to specifically elect a different procedure, where permissible. For example, in Florida, LLCs by statute are automatically managed by their members, this is the default rule unless you elect in your Operating Agreement to be a manager-managed LLC. It is crucial to understand the type of entity you are creating, the default statutory rules which govern its functioning, and which default rules can be changed.

This step is by far one of the most crucial aspects of creating a business that will function smoothly. All too often people choose to skip this step, and end up paying the price in the long run. Spending the time to properly draft these organizational documents now is one of the best ways you can protect yourself and your business from unexpected legal disputes in the future. An experienced attorney can help you understand the legal framework of your business and draft the right documents to make sure your business is off to a great start.

Starting a business can be overwhelming, there are a lot of decisions to be made, and many documents and legal forms to prepare. Getting this done right means giving your business the best possible start. The Law Office of Robert N. Pelier, P.A. has experience handling a wide variety of business-related matters. We serve all business types, from small to large, we serve international clients, and our South Florida local community alike. We are located in Coral Gables, the heart of the greater Miami area, and are dedicated to serving our community. We can help you set up your business the right way, and be in your corner ready to help in every step of operating your business.