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As an aspiring entrepreneur, you have big plans for launching an LLC in Florida. This process can look dramatically different from one region to the next, so it’s important to know exactly what LLC formation looks like in the Sunshine State.
First, the good news: Your future as a business leader in Florida is likely bright, as the state offers a lot for entrepreneurs to love. The state’s taxes are notoriously low, as is the general cost of living. Florida also boasts a strong labor market and a high growth rate for small businesses.
By taking the right steps early on, you can set yourself up for long-term success. This means not only reducing your tax burden but also keeping the risk of business disputes or compliance issues to a minimum.
To help, we’ve outlined the basic process of starting an LLC in Florida, along with oft-forgotten details that may influence your business future in the Sunshine State.
A Limited Liability Company can provide an excellent means of entering the business world at low personal cost while also avoiding personal liability and other potential risks. This versatile option works well for sole proprietors but is also available to business partners or even members who intend to file as corporations. No matter which approach you prefer, these steps will have you on the path to LLC success:
Below, you’ll find a detailed explanation to walk you through each step.
The right name can make a world of difference for branding purposes, so it’s crucial that you choose carefully. Your selection will be determined by a variety of factors, including, of course, the availability of your preferred names.
Unfortunately, several titles that seem ideal for your business may already be used or even trademarked. Your goal: to find something that captures the essence of your business but hasn’t yet been claimed by someone else.
As you brainstorm potential names for your LLC, check early and often whether similar titles are already used for other Florida businesses. Your final selection should be easily distinguishable from any similar business names that already exist within the state. Differences limited to plural forms or use of “&” may not be sufficient to make your business name distinguishable.
When selecting a preferred business name, keep in mind that your organization’s status as an LLC must be reflected in the title. This is required under Florida law, which stipulates that all local LLCs include one of the following words or phrases:
You also have the option to start a professional limited liability company (PLLC). This option is available to any business owner with a professional license. It’s a common solution for physician’s offices, dentists, and other medical providers. Attorneys and CPAs may also prefer to register as PLLCs.
If you opt to create a PLLC, your business name can end with:
Florida law prohibits businesses (whether designated as LLCs or PLLCs) from using terms such as “bank,” “trust company,” or “credit union,” in their names if they are not genuine financial institutions.
If you have a preferred name in mind, search for it on the Sunbiz.org Division of Corporations page. Using a simple keyword tool, you can search by entity or trademark name. Never assume that a particular name is approved until the Division has provided a filing acknowledgment.
As you choose your official business title, consider another naming possibility: using a DBA, or “doing business as” title. As the assumed or trade name, the DBA makes it possible to conduct business under an alternative or “fictitious” name, which is separate from your LLC’s legal name.
Many types of businesses can file as DBAs. This is a common approach among sole proprietorships and general partnerships but is also available for LLCs.
If you open your LLC in Florida, you’ll need to file your DBA with the Florida Division of Corporations. Complete the Application for Registration of Fictitious Name and submit a non-refundable filing fee of $50. If approved, the registration will remain valid for five years.
It may be worth your while to safeguard your products or services against counterfeiting through the use of a registered trademark. This process can be completed at the federal level (with the United States Patent and Trademark Office) and the state level (with the Florida Department of State Division of Corporations).
If registering with the state, complete a search with the aforementioned Sunbiz.org keyword tool. If no previous registrations appear, proceed with the registration form provided on the Division of Corporations website.
Your trademark registration should feature samples that demonstrate how your trademark will be used. Common examples include product labels or containers. Service-oriented LLCs may need to submit flyers or business cards instead.
You’ve selected the perfect business name and filed for DBA or registered for a trademark. With these major undertakings out of the way, you should be ready for another important procedure: filing your articles of organization. This is required in the state of Florida, as in most states. If you neglect to file your articles of organization, your business will not yet constitute an LLC according to local laws.
The articles of organization can look quite different from one LLC to the next, but the Division of Corporations advises that this document always includes these key elements:
When filing the articles of organization, it is possible — but not required — to obtain a certificate of status for a fee of $5.00. This officially certifies your LLC’s existence. Similarly, a certified, stamped copy can be requested for $30.00.
Be prepared to follow up with annual reports, which must be filed to ensure that your LLC remains active. Without this report, your LLC risks being administratively dissolved.
As mentioned above, your articles of organization must highlight whether your LLC will be managed by its members or by a designated manager. This is an important distinction, as Florida LLCs are member-managed by default. That being said, it’s possible to use a manager in lieu of having all members involved in the LLC decision-making process. As the Florida Statutes explains, under this structure, “a matter relating to the activities and affairs of the company is decided exclusively by the manager.”
While member management is the ‘typical’ approach for LLCs, select situations call for the use of a manager. For example, this approach can be helpful when the LLC’s members tend to take on a passive role in running the business. Some large LLCs also opt for managers, as organizing several conventional members can be challenging.
If you opt for manager management, you’ll need to make this abundantly clear in the articles of organization. Your status as manager-managed should also be highlighted in your LLC’s operating agreement. The Florida Statutes recommends including language such as “manager-managed,” “managed by managers,” or “management vested in managers.”
Like every state, Florida mandates the use of a registered agent when starting an LLC. This individual or company is authorized to accept official mail on behalf of your business. To qualify, your LLC’s registered agent must currently have a physical address — not merely a PO box — in the state of Florida.
Keep in mind that, while your business cannot function as its own registered agent, it’s possible for an individual from your LLC to take on this important role. Often, however, the LLC’s manager is selected for this task. Otherwise, it’s also possible to work with a legal service that specializes in serving as a registered agent for local LLCs.
As mentioned previously, a fee of $25 will need to be submitted when designating a registered agent with the Division of Corporations. All registered agents (whether initially selected when filing the articles of organization or appointed later on) must sign a statement verifying familiarity with the role’s obligations, as well as the need to provide notice upon resigning.
Not to be confused with the articles of organization, an operating agreement provides a basic blueprint for your LLC’s governing structure, along with the rights and responsibilities of each member. This legal document can be used to help prevent disputes and provide extra peace of mind.
While operating agreements will vary significantly from one LLC to the next, most will mention the following:
Other possible elements to be included in a Florida operating agreement are outlined in detail in Chapter 605, Section 0105 of the Florida Statutes.
This section also mentions that Florida operating agreements can be created verbally or could even be implied based on LLC member conduct. That being said, it’s always preferable to complete this document in writing, as this format can have implications for liability protection.
While operating agreements are not required by state law, local regulations do outline what they can and cannot cover. For example, under Chapter 605 of the Florida Statutes, an operating agreement cannot:
Given these stringent requirements, it’s worth your while to get help with drafting or reviewing your operating agreement. This will limit the likelihood of inadvertently including any clauses that are not permitted under state law.
No matter where you start an LLC, you’ll need to apply for an Employer Identification Number (EIN). This federal tax number is used to identify your business entity.
The EIN is also useful for everything from building credibility to preventing identity theft. It may prove necessary if you try to open a business account or seek approval for a loan.
An EIN can be obtained directly through the IRS. The application must include the name and Social Security Number (or other taxpayer identification number) of the person responsible for the LLC’s management. Known as the “responsible party,” this individual will typically be one of the LLC’s members.
If you prefer, we can handle this essential step so you can focus on other elements of LLC formation. We are happy to streamline the process so that you receive your EIN as quickly as possible. This will ensure that you can take full advantage of it for tax or business banking purposes.
As mentioned previously, Florida is an amazing place to open an LLC because its tax policies are so favorable. That being said, it’s still important to clarify your tax obligations early on, as these could play a significant role in how you structure your LLC.
Your LLC will be subject to many different types of taxes, including those assessed at both the state and federal levels. Some of these will be paid by individual members, while others will be collected by your LLC and deposited to the appropriate agency.
Keep reading to learn what you can expect from various types of state and federal taxes:
Typically, Florida LLCs are treated as individuals regarding state-based income taxes. In other words, you’re in luck: If your LLC is not incorporated, you don’t have to pay a state income tax. This is a definite perk of living or doing business in Florida, which is one of just nine states to lack a state income tax.
Keep in mind, however, that while Florida LLCs can often avoid state taxes, this isn’t always possible. The state maintains a corporate tax rate — and some LLCs formed there are incorporated. In such situations, it may be necessary to either pay the alternative minimum tax rate (3.3 percent) or the standard income tax rate of 5.5 percent.
While you’ll likely be able to avoid state income taxes, you may need to pay federal income taxes as an individual. If you are the sole member of your LLC, be prepared: it will be treated as a sole proprietorship by the IRS, leaving you responsible for paying up via your individual tax returns.
Federal taxation is similar for multi-member LLCs, but with the caveat that each member pays taxes based on his or her share of the ownership stake.
Florida currently maintains a general state sales tax of 6 percent. Unless exempted, every sale will be taxable, with the cost of this tax added to the total price and collected at the time of purchase.
Because Florida lacks a state income tax, the difference is often made up via local tax collection. This often takes the form of local discretionary sales surtaxes. These range from 0.5 percent to 2.5 percent, although some counties do not charge surtaxes at all. Given these variations, it’s worth your while to look carefully into local tax requirements when determining where in Florida to base your business.
The total tax rate can be calculated by adding the local surtax (if relevant) to the general state sales tax. Your business is responsible for collecting total taxes.
In all likelihood, you’ll need to register as a sales and use tax dealer before you can start conducting business in Florida. This key step can be completed online with an interactive wizard provided by the Florida Department of Revenue. A physical form known as the Florida Business Tax Application (DR-1) is also available.
Self-employment taxes ensure that solo entrepreneurs and LLC members cover Social Security and Medicare taxes. These would otherwise be withheld by employers as part of payroll taxes. The IRS has been known to go after LLC members who neglect self-employment tax obligations, so it’s in your best interest to clarify your need to pay this type of tax as soon as possible.
When in doubt, remember: LLC members are not employees and will therefore need to pay self-employment taxes according to their share of the profits and losses. Look to Schedule SE to help you clarify your tax liability.
If the prospect of paying self-employment taxes seems confusing, just wait: If any employees work for your LLC, you’ll need to handle federal employer taxes, including payroll taxes. These encompass unemployment, Medicare, and Social Security. As an employer, you will be responsible for withholding workers’ shares of these taxes from their paychecks.
Plan to file IRS Form 940 annually and Form 941 quarterly. Payment obligations will not be fulfilled at the time of filing. Rather, the IRS handles payroll taxes on a pay-as-you-go basis, so you’ll need to make deposits according to the agency’s schedule.
While business taxes specific to Florida are minimal, you may need to take other obligations into account if you run a multi-state business. Your presence within other states may be referred to as nexus — and it might mean that while you don’t need to pay income taxes in Florida, they’re still owed elsewhere.
Multi-state tax filing is inherently complicated, so do your homework to determine where differences exist and how they can be handled to limit your tax liability. When in doubt, look to a professional to help you achieve the most favorable tax arrangements possible across state lines.
You’ve successfully started an LLC and are excited to embark on your entrepreneurial journey in Florida. Becoming official is only the start, however. Next, you’ll need to take additional steps to safeguard both your finances and your LLC status.
As an LLC owner or member, it is your duty to keep your personal and business finances distinct. If you begin to treat business assets as your own (a practice known as commingling funds), you risk losing the liability protection you’ve worked so hard to establish.
Often referred to as “piercing the corporate veil,” this phenomenon can lead to personal liability, placing your personal assets or those of fellow LLC members at risk.
Opening a separate business bank account and avoiding all personal use of business funds may be the most effective solution for avoiding personal liability.
When opening a business bank account, you may need to provide LLC documentation such as:
As with opening a personal bank account, you’ll want to choose your provider and plan carefully. Each option will have distinct fee structures, minimum opening deposits, and annual percentage yields (APYs).
Determine which features are most important to your business, keeping in mind that some options will also provide conveniences, such as the ability to pay expenses with a debit card.
In addition to the initial costs outlined above (such as $100 for the articles of organization and $25 for designating a registered agent), you’ll need to continue to pay annual fees to maintain your LLC status.
The main annual expense to anticipate: a charge of $138.75 that accompanies the annual report filing. This report allows you to update business information such as the address of the principal place of business, plus the names and addresses of any LLC members or managers.
Filing on time is crucial, as the attached late fee is notoriously high: $538.75 for annual reports received later than May 1st. A few extra days can translate to an additional $400 for the simple task of updating basic contact information — so don’t delay with this annual to-do.
Establish strong bookkeeping habits from the get-go to prevent any inadvertent commingling of personal and business assets. This will make tax season far easier while also limiting future compliance issues.
Select your bookkeeping method with care. Many LLCs prefer simple, yet targeted solutions such as QuickBooks, as these offer helpful expense reporting. Develop easy-to-maintain systems for tracking not only income and expenses but also inventory, payroll, and sales tracking.
Don’t hesitate to consult with professionals such as accountants or business lawyers. They can help you make the most of Florida’s unique tax environment. Look for highly regarded accounting or law firms that primarily serve the geographic region in which your business will operate.
In all likelihood, you will need to file for multiple licenses or permits as you form your LLC. How you proceed will depend on the type of business you intend to run. If you manufacture or distribute alcoholic beverages, for example, you can apply for one of many relevant licenses, such as Manufacturer/Brewer of Malt Beverages (CMB) or Distributor of Beer and Wine (JDBW).
Each Florida business license holds its own distinct requirements and fees, so do your research to determine what the process will look like and which resources you’ll need to submit to get your applications approved.
Keep in mind that, in some situations, business licenses are helpful but not outright required. In the construction industry, for example, a DBPR license is necessary if constructing a roof for compensation but is not needed when installing awnings that will not ultimately become part of a fixed structure.
If you’re unsure as to which types of business licenses or permits you need, take a moment to check with the Florida Department of Business and Professional Regulation. The DBPR provides a thorough online resource highlighting the many industries that warrant specialized licensure.
If you still have questions about the need for a business license, feel free to seek help from the DBPR’s Customer Contact Center by calling 850-487-1395.
This portion of our website is for informational purposes only. Tailor Brands is not a law firm, and none of the information on this website constitutes or is intended to convey legal advice. All statements, opinions, recommendations, and conclusions are solely the expression of the author and provided on an as-is basis. Accordingly, Tailor Brands is not responsible for the information and/or its accuracy or completeness.