Make sure you protect your business by following the basic corporate formalities.
1. REGISTER YOUR ENTITY WITH THE STATE
In order to establish a limited liability company (LLC) or corporation in Florida, you must register the entity with the Florida Division of Corporations. An attorney can register the corporation for you, or you can do it yourself by visiting the Florida Division of Corporations website. When registering your entity, you should search the name records to make sure that the name you intend to use for your entity is not already in use. Generally, the cost to register a corporation or LLC is one hundred and twenty-five dollars ($125.00).
In most circumstances, an unregistered entity is not authorized to transact business in Florida. Additionally, an unregistered entity will not be able to bring a lawsuit in Florida.
2. OBTAIN AN EMPLOYER IDENTIFICATION NUMBER
Once you have received confirmation from the Florida Division of Corporations that your entity has been successfully registered with the state, it is important to obtain an employer identification number (EIN) for your entity. An EIN can be obtained for you by an attorney. You can also obtain your own EIN by visiting the IRS website. Once you have your entity’s EIN, you should use this to establish a bank account in the name of the entity.
An EIN is necessary to open a bank account in the name of the entity. It is important to maintain a bank account dedicated to business funds, and to refrain from comingling your personal funds with business funds. If you fail to keep your business funds separate from your personal funds, in the event of a lawsuit against your entity, it is likely that a plaintiff will be able to recover from your personal assets and funds. You should contact an attorney in order to ensure that your personal assets are adequately protected in the event of a lawsuit against your business.
3. MAINTAIN AN OPERATING AGREEMENT/BYLAWS/SHAREHOLDER AGREEMENT
It is important that your business has an operating agreement or bylaws or shareholder agreement, depending on your entity type. An operating agreement sets forth the rules for your entity such as how profits and losses will be split, the members of the entity, who controls the entity, etc. This document is especially important if your entity has more than one member or if there is a possibility your entity could have more than one member in the future. If your entity does not have an operating agreement, bylaws or a shareholder agreement, you should consult an attorney who can prepare the document for you.
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4. KEEP COPIES OF RECORDS
Florida requires that LLCs and corporations maintain certain records. An LLC must maintain the following records:
List of names and addresses of each member;
Copy of Operating Agreement;
Copy of Articles of Organization;
Copy of tax returns for the last three (3) years;
Copy of financial statements for the last three (3) years; and
List of contributions given by each member to the LLC.
A corporation must maintain the following records:
Articles of Incorporation;
Bylaws;
All written communications to shareholders for the past three (3) years;
Meeting minutes;
List of names and addresses of current directors and officers; and
Copy of most recent annual report.
5. FILE AN ANNUAL REPORT WITH THE STATE
Florida requires that all entities registered in Florida file an annual report each year. An attorney can file this report, or you can do it yourself by visiting the Florida Division of Corporations website. The annual report confirms the entity’s name, principal place of business, registered agent, mailing address, and other clerical information. An annual report should be filed between January 1st and May 1st. Generally, the price to file an annual report is between one hundred thirty-eight dollars ($138.00) and one hundred fifty dollars ($150.00). Any annual report filed after May 1st will be assessed a four hundred dollar ($400.00) late fee.
Any entity that fails to file an annual report, can be administratively dissolved by the State. This means that in the eyes of the State the entity no longer exists and cannot bring a lawsuit on its behalf within Florida. In the event a lawsuit is necessary, the entity would need to file a reinstatement with the Florida Division of Corporations and pay a fee.
6. SEEK AN ATTORNEY FOR AMENDMENTS OR ADDITIONS OF PARTNERS/MEMBERS/SHAREHOLDERS
In the event that your entity wishes to amend its corporate structure or add a partner, member, or shareholder, it is important to consult an attorney prior to making any changes. The attorney can walk you through the best way to achieve your goal while still protecting your interest.
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