Should I Form a Partnership or a Multi-Member LLC?

To reach its full potential, a business needs to be set up properly. Among other things, it means selecting the right entity for your company. You may be wondering: Should I operate my new business as a partnership or a multi-member LLC? The answer depends on some case specific factors, including the type of business. Here, our Miami partnership attorney highlights the key things to consider when deciding whether or not to form a partnership or a multi-member limited liability company (LLC).

A Business in Florida Needs the Proper Legal Foundation 

Establishing a solid legal foundation is imperative for any business operating in Florida. Your company should always be structured as the most advantageous legal entity. In some cases, you and your co-founder may be deciding between setting up a company as a partnership or a multi-member LLC. Here is an overview of these legal entities:

• Partnership: A partnership in Florida is a legal entity formed by two or more individuals who agree to share profits and losses in a business venture, operating under a written or verbal agreement. There are several specific types of business partnerships, including general partnership, limited partnership (LLP), and limited liability partnership (LLP).
• Limited Liability Company: Florida Department of State explains that a limited liability company (LLC) is a business structure that combines the limited liability protection of a corporation with the flexibility and tax advantages of a partnership. A multi-member LLC is a company with two or more owners who share ownership, management responsibilities, and profits or losses according to the terms of an operating agreement.

 Why You May Prefer a Partnership

 Forming a partnership can be appealing due to its simplicity and flexibility. Partnerships typically require fewer formalities and paperwork compared to multi-member LLCs. They are usually easier and less costly to establish. Beyond that, partnerships offer a high degree of autonomy to the business partners. They offer pass-through taxation—meaning profits and losses are reported on the partners’ individual tax returns.

Note: LLPs do offer liability protection to business partners. However, they are more complicated to set up than general partnerships.

 Why You May Prefer a Multi-Member LLC 

For some businesses, opting for a multi-member LLC offers advantages. The most important is clear limited liability protection. Unlike partnerships, LLCs offer personal liability protection to their members. It helps to shield them from the debts and obligations of the business. Multi-member LLCs also afford significant flexibility in structuring ownership, management, and profit-sharing arrangements through a comprehensive operating agreement.

The Bottom Line: An attorney can review your specific circumstances and help you determine the most favorable business structure. Key issues to consider include:

• Simplicity to set up the business;
• Tax treatment;
• Flexibility of day-to-day management; and
• Liability protection.

Speak to Our Miami Partnership Law Attorney Today

At Pike & Lustig, LLP, our Miami partnership law attorney is standing by, ready to determine the best course of action in your case. If you have any questions about business partnerships, we are here to help. Contact our firm today for your fully private initial appointment. We work with businesses throughout South Florida.