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How To Start An LLC In Florida?
Are you planning to start a business in Florida? An LLC, or limited liability company, could be right for you. It offers the protection of a corporation with the simplicity of a sole proprietorship or partnership. In this article, we’ll show you how to start an LLC in Florida and talk about its benefits. By the end, you’ll be ready to begin your Florida LLC journey and enjoy a flexible, protective, and tax-friendly business structure.
Definition
What is an LLC?
In Florida, a limited liability company (LLC) is a popular business choice. It gives owners, or members, protection from personal debt for the company’s bills. An LLC is simpler to start than a corporation and offers more protection and flexibility to members.
An LLC in Florida doesn’t pay taxes on profits directly. Instead, profits and losses go to the members’ tax returns. This helps members avoid double taxation, which can happen with corporations.
In Florida, anyone can be an LLC member. This includes individuals, corporations, foreign entities, and non-residents. But, some groups like banks and insurance companies can’t form an LLC.
Creating an LLC in Florida is easier than starting a corporation. Members need to file a document called Articles of Organization with the Florida Department of State, Division of Corporations. This document has basic information about the LLC, like its name, address, and registered agent.
Florida LLCs usually don’t pay taxes directly. But, members can choose a different tax option like a corporation. This lets members pick the best tax choice for their business.
A big benefit of an LLC is that members aren’t personally responsible for the company’s debts. But, this protection has limits. If members are involved in fraud or don’t keep proper records, creditors can take legal action against them.
In summary, a Florida LLC gives business owners a flexible and protective structure that’s easy to set up. By choosing an LLC, members can protect themselves from personal responsibility while enjoying pass-through taxation and flexible management options.
Advantages
What’s so special about LLC?
One of the many important things businesses should consider when forming an L.L.C. is choosing the business structure they will be operating with. Whether a sole proprietorship, an S-Corp, or a C-Corp, there are different ways in which the tax returns will be filed under the rules of the IRS.
There are different advantages of forming an L.L.C., which can vary from state to state. Therefore, it is important they consider the advantages and disadvantages that a business may face in their respective states. Here are some of the main advantages that an L.L.C. may be eligible for if they choose to operate and startup in Florida.
Pass-through taxation
Limited liability companies in Florida have default pass-through taxation, which means all revenue generated from the business will be taxed under a member’s individual tax returns. The members will be liable to only pay income and self-employment tax according to their tax bracket.
If the L.L.C. were to operate as an S-Corp or C-corp, then the members would be subjected to double taxation due to, which means that as a business owner, the profits will be taxed first based on the corporate tax rate. After profit distribution, the IRS will tax them again through individual tax returns. You can avoid paying double the taxes with pass-through taxation.
Affordable filing fees
Another benefit of an LLC in Florida is that the tax filing fees are fairly affordable compared to other states such as California. You must pay a one-time fee of $125 to file your organization’s articles in Florida.
Flexible Ownership for Your LLC
Another great benefit of owning an LLC in Florida is that the state government does not have many restrictions regarding how business members or owners structure their businesses. Thus, entrepreneurs can form an LLC as a:
- Single-member LLC
- Multiple members limited liability (LLC) that is managed by multiple different members.
- Multiple members limited liability company(LLC) that is managed by a person or a manager that is appointed by the owners of the company.
Business name protection
In Florida, you can register your business names under Florida state law. The name of your business is protected by the state of Florida, and it can not be used by any other business. If your business is a sole proprietorship or a partnership, it must operate under the owners’ names. Meanwhile, an LLC can operate under any name, allowing the owner to choose a catchy name that fits the business and can capture a good audience.
Increasing the credibility of your business
If you form an LLC in Florida, regardless of which type of business you are running, you can make your business appear more credible than the rest of your competitors. Having credibility while running a business is very important because consumers will only choose a business they can trust, and vendors or producers will also only choose to work with credible businesses.
If you are an LLC, you will seem much more professional as you have the LLC stamp next to your name. This means that people will be more willing to work for you, and achieving this as a sole proprietorship can be much more difficult compared to an LLC.
Multiple different tax options
Another benefit that limited liability companies in Florida have is that they can choose from different tax options, such as:
- A partnership for multiple members LLC
- If you want to be taxed for corporate business tax, then you can choose to do so, as it provides one with the ability to write off certain business expenses
- A single-member LLC is considered a disregarded entity, meaning the business does not opt for any other tax designations.
Disadvantages
When is LLC not right for me?
Many Florida-based limited liability companies can benefit from Florida state laws. However, there are some disadvantages that they may have to face, such as:
Higher Formation Costs
Proprietorships and partnerships may have to pay less annual fees than an LLC in Florida. One of these annual fees can include an annual report fee which can cost you around $138.75 per year. If you are late in paying this fee, it can end up causing you over $500 in late fees. Moreover, you may also have to pay a late fee throughout the year to a law firm or a business that accepts your legal documents on your behalf.
Limited Case Laws
Since limited liability companies are a newer concept than corporations and partnerships, if a legal dispute arises, then the Florida court system may not have as much prior evidence to look at when processing your court case. If a situation where you get sued by someone arises, there would be fewer rulings to guide your legal process.
This can make things much more unpredictable when it comes to the outcome of the ruling. Therefore, this is something that you must be very careful of before choosing to form an LLC in Florida. There are other states, such as Delaware, where the rulings might prove to be in your favor as there is more legal evidence to help your court rulings.
Ownership Transfer is Difficult
Another major drawback of forming an LLC in Florida is that ownership transfer can prove to be fairly difficult. When forming an LLC in Florida, all the ownership details must be laid out in the operating agreement. If this is not possible, you are required to get consent from all the members, which can lead to conflict among the business owners.
LLC Formation
How to Form a Limited Liability Company in the State of Florida
There are the steps that must be taken when forming a limited liability company in the state of Florida, such as:
- Name your Floridan LLC
- Choose your registered agent
- Prepare and file articles of organization
- Receive a certificate from the state
- Create an operating agreement
- Get an employer identification number
- Obtain a Florida business license
- Establish a bank account in the state of Florida
Name your Floridan LLC
Before you start a limited liability company in the state of Florida, you must decide on a name for your company. The name must comply with the naming criteria that are set by the state of Florida, and these conditions are;
- Words such as attorney and lawyer may require you to provide the Florida state with additional legal documents.
- The name must not contain words used to name a government agency such as the CIA or FBI.
- Your name must be different from existing businesses in the state of Florida.
- Your business name must include the words limited liability company or LLC in their name.
- It is important to reserve your name if you are not planning to register immediately, as someone else can take that name before you register.
Choose your registered agent
The state of Florida requires you to appoint a registered agent for your LLC. A registered agent will receive your official documents on your behalf. The registered agent, however, must meet the required criteria:
- Entities must provide registered agent services.
- The agent must have an official address in the state of Florida.
- The agent must be available to accept all business documents during regular business hours and remain on-site at all times during these business hours.
Prepare and file articles of organization
The article of the organization is an official document that establishes your LLC by laying out the basic information about your business. Make sure all of the paperwork is done and ready for when you register.
Receive a certificate from the state
The state will send you a certificate confirming your existence as a limited liability company once you have completed these steps. This certificate will allow an LLC to obtain employer identification.
Creating an operating agreement
It is important for every LLC registered in the state of Florida to have an operating agreement outlining how the business will limit liability entity will conduct its business.
Get an Employer Identification Number (EIN)
The nine-digit employer identification number is assigned to your business by the Internal Revenue Service so that you are liable to pay taxes.
Obtain a Florida business license
Limited liability companies are required to obtain a Florida business license in different industries. You can check if you need to obtain one by looking it up on the Florida Secretary of State’s website.
Establish a bank account in the state of Florida
Having a limited liability company in the state of Florida requires you to establish a company bank account before you can begin conducting business operations.
Types of LLC
Which type of LLC is ideal for me?
In Florida, there are different types of LLCs to fit your business needs. Some common types include:
- Single-Member LLC: This LLC has one owner. It’s great for people who want to run their business alone and enjoy the benefits of an LLC.
- Multi-Member LLC: This LLC has two or more owners. It’s perfect for businesses with several owners who want to work together, share tasks, and enjoy the LLC’s protection.
- Manager-Managed LLC: In this LLC, the owners pick one or more managers to run the business. The managers make daily decisions, and the owners take a back seat. This works well for businesses with owners who don’t want to be involved in daily operations.
- Member-Managed LLC: In this LLC, all owners take part in managing the business and making decisions. This type is good for small businesses where the owners want to be directly involved.
- Professional LLC (PLLC): A PLLC is for licensed workers like doctors, lawyers, architects, or accountants. This type of LLC is needed when the business offers services controlled by Florida state licensing boards.
- Series LLC: A series LLC lets you create separate “series” within one LLC. Each series can have its assets, debts, and owners and operates independently. This structure is useful for businesses with multiple parts or projects that need to be kept separate.
Choose the right type of LLC for your business based on your needs and goals. Talking to a business lawyer or an accountant can help you decide.
LLC Taxes
LLC taxes & licenses
The state of Florida offers a good amount of advantages to small business owners in terms of paying taxes compared to other states. Businesses in Florida have to pay very little in taxes compared to other states in the United States.
Florida is a tax-friendly state that does not impose income taxes on individuals and only has a 6% sales tax. Corporations in Florida are only subject to paying 5.5% income tax, which is much less compared to other states.
One major benefit of having an LLC in the state of Florida is that limited liability companies, sole proprietorships, and S-corporations are not viable to pay income tax on their business’s revenue, and they can end up saving much more money.
Since individuals are not viable to pay income tax, small business owners do not need to pay income taxes on the income from their business, which they transfer into their bank accounts.
Cost
Cost of forming an LLC
Starting an LLC in Florida has some costs. Here are the main fees to expect:
- Filing Fee: When you file the Articles of Organization with the Florida Department of State, you’ll need to pay a one-time fee. As of September 2021, the fee is $125. Check the Florida Division of Corporations website for current fees.
- Registered Agent Fee: Florida LLCs need a registered agent to get legal documents. You can be your own agent, or you can hire a professional service. If you hire a service, you’ll pay an annual fee of $50 to $300 or more.
- Annual Report Fee: Florida LLCs must file an annual report. As of September 2021, the fee is $138.75 for LLCs. Check the Florida Division of Corporations website for current fees.
- Business Licenses and Permits: You might need more licenses or permits based on your business activities and location. These costs vary depending on your industry and location.
- Optional Services: Some businesses hire a lawyer, an accountant, or a professional service to help start an LLC. The cost depends on the provider and the services you need.
Remember, these costs can change. Make sure to check the most recent information with the Florida Division of Corporations and other authorities when starting your LLC.
LLC Costs
Filing fee
$125
Registered agent fee
$300
Annual report fee
$138.75
For non-residents
Florida foreign LLC
Foreign entities can start an LLC in Florida by following these rules:
- Name Reservation: Your LLC’s name must be unique in Florida. Check the name availability on the Florida Division of Corporations website. If needed, you can reserve the name for up to 120 days by submitting an application and paying a fee.
- Get a Certificate of Good Standing: The foreign LLC must have a Certificate of Good Standing from its home state. This document shows that the foreign LLC is in good standing and allowed to do business in its home state.
- Choose a Registered Agent: Foreign LLCs need someone in Florida to receive legal documents. This person or business must have a physical address in the state and be available during regular business hours.
- Submit an Application: The foreign entity must complete an application and send it to the Florida Division of Corporations with the required filing fee. As of September 2021, the fee is $125. Check the Florida Division of Corporations website for current fees.
- Follow Florida Taxes and Rules: Foreign LLCs must follow Florida’s tax laws. This may include registering for sales tax, unemployment tax, or other taxes. Talk to a tax professional to ensure you follow all tax requirements.
- Get Necessary Licenses and Permits: The foreign LLC might need more licenses or permits based on its business and location. Make sure to research the requirements for your industry and area.
Keep your information up to date with the Florida Division of Corporations and follow all state rules. This includes filing annual reports and maintaining a registered agent. If you don’t, you may face penalties and lose the right to do business in Florida.
Starting A Business
Starting a business in Florida
When you are starting a business in the state of Florida, there are multiple steps that you must follow. While the steps may seem very hard, most of them are not as time-consuming as one would imagine. Once you have gone through the steps mentioned above, you can easily be on your way to conducting business operations in the state of Florida as an LLC. The state will exempt you from many of the large amounts of taxes that you otherwise have to pay in other states.
Comparisons
Is LLC The Best Entity For Me?
Maybe, LLC isn’t the right entity for you. Maybe it is a C-Corp. Only way to find out is to directly compare them all.
LLC vs Corporation (C-Corp)
Sole proprietorships and Limited Liability Companies (LLCs) are two of the most common business entities for individuals and small businesses. Learn what differentiates the two today.
LLC vs S-Corp
Not sure what business structure to choose? Learn about the key differences between LLC and S-Corp today.
LLC vs Sole Proprietorship
The primary difference is that an LLC provides limited liability protection for its owners, while a sole proprietorship does not.
FAQ
Frequently Asked Questions About Starting An LLC In Florida
Here are the most commonly asked questions about forming an LLC business in the state of Florida:
Yes, it is fairly simple to open a limited liability company in the state of Florida. As mentioned above, there are around eight simple steps that one must follow to form a limited liability company.
An individual can choose to open a limited liability company in the state of Florida. Moreover, if you are a small business and an individual running a limited liability company, you are exempt from paying income taxes on your business revenue. You can also convert your existing company into an LLC
Yes, having a registered agent for your limited liability company is very important as it is a state requirement.
If you are a limited liability company and choose to register in the state of Florida, then you will not have to pay double taxes on your company’s revenue. Double taxation is when tax is first cut before you’d receive your business generate revenue, and then the second cut is when it is deducted as your individual income tax.