Sat 09 Apr 2016 | By:

Pros and Cons to Starting a Florida Corporation

Pros and Cons to Forming a Corporation

Incorporation is an essential legal process that you shouldn’t ignore. It can give you numerous benefits that will help you run your Florida startup. While the process is not easy, it’s definitely worth the hard work.

Starting a Corporation in Florida may be your best option if you’re looking for the right legal entity for your small business. Most entrepreneurs choose corporation as their business structure of choice due to the high level of protection and tax benefits that corporations provide. Before we discuss starting a corporation in Florida, lets discuss the pros and cons of this legal entity.  While there are many advantages, they are accompanied by some downsides. The goal of this article is to help you decide whether a Florida corporation is the best choice for your business by discussing the pros and cons of this business structure.

Pros to Starting a Corporation in Florida

1) Protection Against Liabilities

If you run a Florida corporation, you will be protected against legal, financial and personal liabilities.

When you incorporate, you establish your business as a separate entity.  Your business is independent from its owners, thus having its own rights and ability to conduct individual transactions. Any issue that may arise will not be your responsibility, therefore you will not be held accountable.

Therefore, since your Florida small business has its own rights, it will be given due process.

2) Establishes Perpetual Existence

In simple terms, perpetual existence means establishing the lifetime continuity of your Florida corporation.

When starting any business, remember that your startup can outlive you or your business partners.  However, if you incorporate, you can ensure your business’ lifelong existence. In the event of the death of a founder, there will be no transfer and selling of stocks and shares.  Shares are easily transferable, so business can continue, even in your absence.

3) Lower State Taxes

When your Florida small business if formed under corporation status, it becomes a separate taxpayer that is in charge of paying its own taxes.

Tax laws in most states have proven time and time again how advantageous it is to start a corporation, as state taxes collected from this legal entity is lesser compared to others.

While your Florida startup still needs to pay for income tax, withholding tax, business tax and others, corporations incur less costs when compared to other business structures, such as sole proprietorship and general partnership.

4) Builds Business Credibility

One of the best things that incorporating under a corporation can give you is business credibility.  Many startups find that establishing credibility early on is difficult, however, if you form a corporation, consumers will see trustworthiness and reliability when they look at your business.

Knowing that you are legally registered before the state will cause consumers to trust you more and patronize your business more frequently, helping you build a solid customer base.

5) Organized Management Structure

Power struggles can disrupt your business operations and affect your business health.  This can be avoided if you form a corporation. Corporations are required to create an organized and solid management structure. As a result, positions are clearly defined and the hierarchy is well-established, thereby reducing conflict.

From shareholders, to the Board of Directors, to the management staff and employees, every position has its own description and scope.  Everyone knows their roles; no overlap will occur or task will be left out due to confusion.

These are just some of the most advantages of forming a Florida Corporation. To ensure that your business is fit to be incorporated as a Corporation, consult with an attorney or (to save money) use a business entity comparison chart.


Cons to Starting a Corporation in Florida

1) Expensive, Challenging and Time-consuming

As with any kind of government or legal process, forming a corporation is an expensive, challenging and time-consuming procedure.

Challenging, especially if you’re a first-time business owner, and time-consuming because the process itself is quite long.  You will be required to prepare many documents, creating the potential for delays.  Creating a Florida corporation may also be expensive.

2) Risk for Double Taxation

Double Taxation simply means that corporate income is taxed twice. However, this will only happen when the earnings of a corporation is paid to shareholders in the form of dividends as payment for their investments.

For every dividend income that a business owner or co-founder receives, he or she will be taxed with personal income taxes, thus, double taxation occurs.

3) Subject to Numerous Government Regulations

While a Florida corporation is well-protected, it is also subject to strict government rules and regulations. Aside from major government departments, such as the Internal Revenue Service, they are also governed by numerous government agencies within the state.

A corporation also has numerous compliance requirements.  The more documents you are required to fulfill, the more costly and time-consuming the process becomes.

4) Difficult to Dissolve

Due to the rigorous process of forming a corporation and its ability to transfer shares of stock easily, it’s  understandable that a corporation is difficult to dissolve.  Every aspect of a corporation is strictly regulated:  formation, operation and even dissolution.

To avoid prejudice on the part of the creditor, the liquidation process of a corporation follows strict protocols.

5) Follows Too Many Corporate Formalities

To fully establish that your Florida small business as an independent entity, you need to follow specific procedures. One example is conducting corporate formalities.  Corporate formalities include regular board meetings, employee conferences, safe record keeping of business activities, and other requirements.

After reviewing the pros and cons listed above, is forming a corporation right for your Florida small business?

If not, explore other business structures, such as the Florida LLC.  However, if you’ve decided to incorporate under corporation, the next step is to study how to start a corporation in Florida – that is, if you intend to do the process yourself.

If you want to avoid all the hassle, you can always hire the services of an online incorporation service. They will assist you with everything.

After reviewing the advantages and disadvantages of forming a Florida corporation, you are ready to make an informed decision. At the end of the day, as business owners, we all want the best for our startups.  If you feel like forming a corporation is for you, go for it!

Please be aware that this is not legal advice – it is solely an informational guide. For details on how to form a Corporation in Florida or starting a business in Florida, a lawyer has the best answers for you.

About Ryan James

Half hardworking hermit, half avid adventurer, Ryan founded Startup Savant to simplify entrepreneurship and pay it forward by donating a portion of all revenue to support children's education via