A variety of different business entities operate in Florida, each with its own characteristics and structure. The main way to discern the type of business entity you are dealing with is from the ending of the business’s full name – whether Inc., LLC, P.A., LLP, etc.
These endings tend to form an “alphabet soup” that can be confusing for some. To help out, here is a short summary of some of the most common types of business associations (or entities) that you may find, and what they mean:
“Inc.” = “Incorporated” – A business with this ending is a corporation, the typical entity a person associates with a business. Every corporation is owned by its shareholders, who in turn elect directors to oversee the operation of the business. The directors generally hire a group of officers (CEO, President, CFO, etc.) to run the business, who in turn answer to the directors. Since the corporation is a separate legal entity, the shareholders and directors often enjoy legal protection (known as the “corporate veil”) from any lawsuits the corporation faces, but that can fail (or be “pierced”) under certain circumstances.
“P.A.” = “Professional Association” – Businesses with this ending are also corporations and are similarly structured with shareholders, directors, and officers. However, the owners, operators, employees, etc., of a P.A. generally have to be members of a particular profession, (doctors, lawyers, engineers, etc.). In fact, a P.A. can only be formed for the purpose of performing the service(s) associated with its underlying profession. Also, liability protections are not the same as in a corporation, based upon the nature of the professional services provided by the P.A.
“LLC” = “Limited Liability Corporation” – This entity employs the characteristics of a corporation and a partnership. The typical LLC entails a group of individuals, as members, who create the LLC by agreement (and registration with the State). Each member is entitled to a share of the profits and voting power. LLC members usually have legal protection from the LLC’s debts and lawsuits, as well as from the legal problems an individual member may incur while conducting LLC business. This entity has particularly gained popularity as of late, so the rules around LLCs tend to change from time to time.
“LP,” “LLP,” and “LLLP” = “Limited Partnership,” “Limited Liability Partnership,” and “Limited Liability Limited Partnership” – These entities are variations of the traditional partnership, which (unlike a partnership) must be registered with the State. Each form impacts the traditional partnership model in its own way:
- In an LP, there are general partners, who function the same as the partners in a traditional partnership, and limited partners, who are investors who contribute money and expect a return on their investment (in the form of profit sharing). The limited partners are only liable up to the amount they have invested.
- In an LLP, the partners enjoy legal protection from the debts and lawsuits of the LLP entity, as well as from the legal problems another partner may incur in conducting LLP business.
- An LLLP is a combination of an LP and an LLP. Thus, an LLLP has general and limited partners just like an LP, as well as the liability protections of an LLP to the general partners (because the limited partners are only liable up the amount invested, just as in an LP).
