Many first-time and seasoned entrepreneurs alike often choose to structure their companies as a limited liability company (LLC). This legal structure combines many of the favorable characteristics from sole proprietorships (one end of the spectrum) and C-corporations (the other end). Owners are referred to as members in the context of LLCs; depending on your particular situation, you might prefer to be the sole member or spread the responsibility around. This blog will take a look at some of the key differences between single-member and multiple-members LLCs in Florida.
Member-Managed or Manager-Managed?
Members of a multiple-member LLC have two options when it comes to actually managing operations: member-managed or manager-managed. In a member-managed LLC, all members do their part in managing the company and often have equal voting rights. It is important to note that multiple-member LLCs in Florida are considered to be member-managed unless otherwise specified.
A manager-managed LLC means that the members (owners) have selected a particular member or members to act as manager(s). Outside hires may also be designated as a manager. This could be a good arrangement if one or more members simply want passive income out of the arrangement (and nothing else).
Member Meetings
When it comes to annual requirements and compliance, both types of LLCs have many similarities. Both single-member and multiple-member LLCs must submit an annual report and, depending on how they are taxed, certain documents with the IRS. However, it is usually a good idea to hold regular meetings for multi-members LLCs and keep minutes of those meetings. This is not a requirement, but it can be useful for many reasons (including liability considerations).
Tax Structures
As we just alluded to, there is flexibility for members of LLCs to choose the tax treatment for their companies. Single-member LLCs may be taxed as a sole proprietorship or an S-corporation. Multiple-member LLCs may be taxed as either an S-corporation or partnership.
Conclusion
While there is one obvious difference between single-member LLCs and multiple-member LLCs—the amount of members (owners)—there are several more important distinctions that need to be considered before you choose the LLC structure that works best for you and is more likely to help you reach your objectives.
There is one more distinction, though, that did not get covered in this blog but is covered in our firm’s video from our website. We believe this is the most important difference between these two types of LLCs. Be sure to check out our video for that distinction; if you are ready to get started with a 15-minute business strategy session with our firm, please click here to book your session or call us at 954-282-9331.
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