How to Choose a Business Structure in Florida

The choice of business structure determines how much personal liability an owner assumes for business debts, how income is taxed, and whether the owner’s interest in the business is protected from personal creditors. Florida recognizes several entity types, each with distinct legal characteristics. The decision should account for liability exposure, tax treatment, operational flexibility, and the owner’s long-term goals for the business.

Most Florida business owners benefit from forming a limited liability company. The LLC combines personal liability protection with pass-through taxation and minimal governance requirements. For businesses with specific needs around investor capital, professional licensing, or self-employment tax reduction, other structures may be more appropriate. This page compares the available options with an emphasis on how each structure affects asset protection.

Sole Proprietorship

A sole proprietorship is not a separate legal entity. The owner and the business are legally identical, which means every business debt and every liability arising from business operations is the personal obligation of the owner. There is no corporate shield, no liability cap, and no separation between business and personal assets.

Florida does not require a sole proprietor to file formation documents with the Division of Corporations. If the business operates under a name other than the owner’s legal name, a fictitious name registration is required, but this creates no liability protection. Income and expenses are reported on Schedule C of the owner’s personal tax return.

The sole proprietorship is appropriate only for very low-risk activities where the owner has minimal assets to protect. For any business that interacts with the public, employs workers, or generates meaningful revenue, the absence of liability protection makes this structure inadequate. Forming an LLC eliminates the personal liability exposure at a modest cost.

General Partnership

A general partnership arises automatically when two or more people conduct business together for profit. Like a sole proprietorship, a general partnership offers no liability shield. Each partner is jointly and severally liable for all partnership debts and for the wrongful acts of any other partner committed in the ordinary course of business.

This joint-and-several exposure means a creditor can pursue the personal assets of any single partner for the full amount of a partnership obligation, regardless of that partner’s ownership percentage. A partnership agreement can allocate rights and responsibilities between partners, but it cannot limit the partners’ liability to third parties.

General partnerships are rarely appropriate for any business where liability protection matters. A multi-member LLC provides the same pass-through tax treatment with the added benefit of a liability shield between the business and each member’s personal assets.

Limited Partnership

A Florida limited partnership consists of at least one general partner who manages the business and bears unlimited personal liability, and one or more limited partners whose liability is capped at their capital contributions. Limited partners may not participate in management without risking the loss of their limited liability status.

Limited partnerships are used primarily for investment vehicles and family wealth transfer structures where a managing partner needs operational control and passive investors want liability protection without management responsibility. The limited partnership does not protect the general partner, who remains personally liable for all partnership obligations.

For asset protection purposes, the limited partnership’s value lies in the charging order protection it provides to limited partners’ interests. A creditor of a limited partner cannot seize the partnership interest or force distributions. The creditor’s sole remedy is a charging order, which is a lien on distributions if and when the partnership makes them. This protection is similar to what a multi-member LLC provides, but the limited partnership imposes the additional requirement that limited partners stay out of management.

Limited Liability Company

The LLC is the most versatile entity for Florida business owners. Chapter 605 of the Florida Statutes governs LLCs and provides both a corporate shield against business liabilities and flexible management and tax options.

An LLC member’s personal assets are generally protected from business debts, lawsuits against the company, and contractual obligations of the business. This protection holds as long as the member maintains the LLC as a separate entity, avoids commingling personal and business funds, and does not personally guarantee business obligations. The operating agreement defines the governance structure, profit allocation, and transfer restrictions that formalize this separation.

From the other direction, an LLC also protects the business interest from the member’s personal creditors. In a multi-member LLC, a personal creditor’s sole remedy is a charging order, which entitles the creditor to receive distributions only if and when the LLC makes them. The creditor cannot force a distribution, vote on LLC matters, or seize LLC assets. This protection is one of the LLC’s most significant asset protection features and is unavailable with corporations.

A single-member LLC provides the same corporate shield against business liabilities, but its charging order protection is weaker. Florida courts have allowed creditors to foreclose on a single-member LLC interest rather than limiting the creditor to a charging order. Adding a second member or owning the interest jointly with a spouse as tenants by the entirety strengthens the protection.

LLCs are taxed as pass-through entities by default. A single-member LLC is treated as a disregarded entity, and a multi-member LLC is taxed as a partnership. Either can elect S corporation or C corporation tax treatment if doing so produces a better tax result.

Corporation

A Florida corporation is a separate legal entity governed by Chapter 607 of the Florida Statutes. It provides a liability shield that protects shareholders’ personal assets from business debts and liabilities, similar to the LLC’s corporate shield.

Corporations require more governance formalities than LLCs. A corporation must have a board of directors, hold annual shareholder and director meetings, maintain minutes, and observe the separation between shareholder decisions and board decisions. Failure to follow these formalities increases the risk that a court will pierce the corporate veil and hold shareholders personally liable.

A C corporation is taxed at the entity level on its profits, and shareholders are taxed again when profits are distributed as dividends. This double taxation makes the C corporation structure less attractive for small and mid-sized businesses. C corporations are most appropriate for businesses that plan to seek outside investment, issue multiple classes of stock, or eventually go public.

The critical difference between corporations and LLCs for asset protection is how personal creditors can reach the owner’s interest. A creditor of a shareholder can levy and sell the shareholder’s corporate stock to satisfy a judgment. There is no charging order limitation for corporate stock. This means a personal creditor can become a shareholder of the corporation, attend meetings, and vote on corporate matters. For business owners concerned about personal creditor exposure, the LLC’s charging order protection makes it the stronger structure.

S Corporation Election

An S corporation is not a separate entity type. It is a tax election available to both LLCs and corporations that meet certain requirements, including having no more than 100 shareholders, only one class of stock, and no nonresident alien shareholders.

The S election eliminates double taxation by passing income through to shareholders’ personal returns. For owner-employees, the S election can reduce self-employment tax because only the owner’s salary is subject to employment taxes, while distributions above a reasonable salary are not. The comparison of S corporations and LLCs addresses this tax distinction in detail.

An LLC that elects S corporation tax treatment retains its LLC legal characteristics, including charging order protection. A corporation that makes the S election retains its corporate legal characteristics, including the vulnerability of shareholder stock to creditor levy. For this reason, business owners who want both the self-employment tax benefits of an S election and the creditor protection of a charging order should form an LLC and elect S corporation tax treatment rather than forming a corporation.

Comparing the Structures

Structure	Liability Shield	Personal Creditor Protection	Default Tax Treatment	Governance Requirements
Sole Proprietorship	None	None	Schedule C	None
General Partnership	None	None	Partnership (Form 1065)	Partnership agreement optional
Limited Partnership	General partner: none; limited partners: yes	Charging order for limited partners	Partnership (Form 1065)	Certificate of limited partnership required
LLC (multi-member)	Yes	Charging order only	Partnership (Form 1065)	Operating agreement recommended
LLC (single-member)	Yes	Weaker; foreclosure possible	Disregarded entity (Schedule C)	Operating agreement recommended
Corporation (C corp)	Yes	None; stock subject to levy	Corporate tax + dividend tax	Board, annual meetings, minutes required
Corporation (S corp)	Yes	None; stock subject to levy	Pass-through (Form 1120-S)	Board, annual meetings, minutes required
LLC with S election	Yes	Charging order only	Pass-through (Form 1120-S)	Operating agreement recommended

Choosing the Right Structure

For most Florida business owners, the LLC is the default choice. It provides liability protection, pass-through taxation, operational flexibility, and charging order protection that no other entity matches. The LLC overview provides a comprehensive discussion of how the LLC’s features work together for asset protection.

A corporation may be appropriate when the business needs to raise capital through stock issuance, plans to go public, or operates in an industry where corporate form is customary. A professional LLC or professional association is required when the owner must hold a professional license.

Sole proprietorships and general partnerships should be avoided by anyone with assets to protect. The absence of a liability shield in these structures exposes the owner’s personal wealth to every risk the business encounters.

The Florida asset protection overview discusses how entity selection fits within a broader asset protection strategy that may include statutory exemptions, trust planning, and offshore structures.