How to Form an LLC in Florida

Florida, also known as the Sunshine State, boasts of enviable quality of life. People living here have access to numerous recreational facilities, warm beaches, beautiful nature, and affordable living. It’s no wonder that so many people look forward to retiring in this beautiful state.

Besides an amazing quality of life, the state has a lot to offer regarding business opportunities. In this world’s increasingly competitive market, it has become more important to reduce the hassle spent on setting up a business. These days, people prefer to focus on growing their business rather than all the initial paperwork. The state of Florida understands this and provides you with plenty of opportunities to do this.

Business Environment in Florida

When starting any business, you always have to think about all the external factors that can affect your operations. These include current and future regulations, tax implications, reliable workforce availability, operation cost, and more. Below are some of the expectations in the Sunshine State:

Favorable Policies

At the end of the day, you want to invest in a region where systems are in place to aid rather than curtail you. In Florida, authorities are not your enemies but rather friends that want to help you direct your business in a profitable direction. Tax structures, as well as regulations, are friendly to new and upcoming businesses. Thus, you can spend more time focusing on your business goals instead of looking for suspicious venues. That is one of the reasons why many people opt to launch their business here.

Developments

Here, we’re not only talking about quickly growing business ventures. This also extends to what authorities and investors do to develop the state – from high-speed networks to well-built homes and office spaces – there are so many opportunities. This means you don’t have to worry about proper support for your business. The foundation is already strong, and all you need to succeed is to ensure that your business is well-planned.

Business Growth

Florida has long been home to international companies, which will only grow in numbers. You probably know that businesses tend to rely on each other in terms of growth. These synergistic tendencies are apparent in the state, with more businesses coming up to complement each other. There is a lot of room for growth. Additionally, thanks to the transport facilities, having business in Florida allows you to take advantage of the growing global market.

Hiring

Your business may start off small, without much side support. But in the long run, you may find out that you need capable professionals to get the work done and satisfy your customers’ demands. This should not be a problem in Florida. With a population of more than 9 million workers, it will be easy to find the right staff for the job. Moreover, the state is home to wonderful institutions and training programs to help capable employees make their way to the labor market every year.

Work-Life Balance

Gone are the days when people wanted to spend hours staring at work reports only to get home late at night to get a short rest. People now want to live their lives outside work, and what better place for this than the Sunshine State? You and your employees can enjoy wonderful recreational facilities and resting places while bathing in the sun and learning about diverse cultures. The cost of living is also fair, which means you will have more disposable income to spend on entertaining activities.

Starting an LLC in Florida

Now that you can see the pros for your business, how do you start? We’d like to share a few basic steps on starting an LLC in Florida, as well as share information about reliable agencies you can contact for support. Read on to find out more.

Step 1: Entity and Name Selection

Entity Selection

An entity refers to an organization that’s formed to conduct business. We’re focused on LLCs, however, there are also other types of entities:

• Sole Proprietorship;
• Partnership (General and Limited Liability);
• Corporations (C& S).

Choosing an entity type is very important since it determines how you will run your business in the future. Think about how many owners you will have and what is your financial situation. There’s no all-in-one solution here for every business, so you will have to choose the structure that best fits your goals. Below are a few other things to consider when making your decision:

• What is your responsibility in case something goes wrong in terms of your business operations? Will your assets be at stake? You need to understand how each of the entities would play out if something goes wrong. You may have heard of cases where people got sued over accidents in the workplace and had to pay fees. In your case, will the money come from your personal bank account?
• How taxable will your operations be? Let’s face it – people spend a lot of time trying to avoid paying taxes. The cost of running a business might be too high for certain structures. Thus, you need to understand your taxability, and if there are any ways to reduce taxes. Hiring an accountant will help you figure out how much you have to pay annually.
• How will you manage your profits? The goal of every business is to make a profit, and once you get your income, it’s highly important that you understand what you will do with it. Suppose you have a large team of employees, how will you share the money? Note that a business entity you choose will affect how much you get and when you get it. Depending on your entity type, you can get into trouble for sharing profits in an illegal manner. 
• How much say will you have in the decisions? Note that the more people you have in your entity, the more opinions you will have, and the harder it will be to figure things out.
• Finally, how much work do you need to do to stay compliant? You might find that you have to hold meetings and write reports to stay within the bounds of the law. Learn which documents you must file, when and why you must file them, and if that’s something you are ready to sign up for, at all.

Keep in mind that your decision can cost you a great deal unless you consider every detail. When in doubt, ask for support from a professional accountant and attorney. While this might cost you a fortune, eventually it’s worth the money.

Why form an LLC?

Of all the entity types you can form in the state, why would you choose an LLC? If you check current stats, many entrepreneurs have gone this way, not for nothing. Below are some of the key reasons behind choosing an LLC in the Sunshine State:

• Tax benefits – business people often cringe when they think of taxes and how much money they spend on trying to obey the law. LLCs offer you a way to avoid double taxation – you and other business partners can report profits and losses on individual tax returns. If any tax is due, you can report your share of income on your personal tax returns. This avoids double taxation. How great is that?
• Membership – do you know how many people can be part of your business? Well, in  LLCs, there are no restrictions as to how many business members (owners) you can have. With other entities, the law often curtails the number of business owners, which is a bummer. With an LLC, you can have as many owners as you want, including a single person. Also, this flexibility extends to profit shares – you decide who gets what and why by coming up with a detailed operating agreement as we will cover a bit later.
• Less paperwork – apart from articles of organization, you can avoid much of the hassle, which is part and parcel of other entities. You do not have to spend hours working with papers or hold director/shareholder meetings to make sure that your business meets the law. LLCs need less record-keeping compared to C- or S-corporations.
• Subsidiaries – if you look at S-corporations operating in Florida, you will notice that the formation of subsidiaries is subject to restrictions. LLCs can have subsidiaries, which provides great opportunities to expand faster. LLCs usually form subsidiaries to act as an extension of the parent company to venture into new markets.
• Protection – in this case, we refer to how much you can lose in the event that you get sued. With an LLC, you have personal liability protection, which ensures your private assets remain untouched in case anything goes wrong. Note that this protection tends to be higher with multi-member structures as compared to sole proprietorships. Since only LLC assets are used to pay off business debts, LLC owners might lose only the money invested in the LLC. For example, you may want to take a look at the Shaun Olmstead, et al., Appellants, v. Federal Trade Commission, Appellee case that took place in the Florida Supreme Court back in 2010. 

An LLC is the gift that keeps on giving!

Want to learn more? Read our full Choose a type of business

Name Selection

Before you register your company, you must give it a name. This process may look simple at the start, but the truth is, it has more complications than you might imagine. When choosing a name for your LLC, think about how your customers will identify you. It should be something memorable and immediately recognizable. Secondly, this is how authorities will refer to you, which means the name should meet the following guidelines:

• The name should have a designator indicating an LLC, which may include “LLC,” “L.L.C.,” and “Limited Liability Company.”
• The name should not include or imply associations with other entities or government agencies. For example, you cannot name your business “ABC Corp LLC,” as this would imply that its operations also fall under a corporation. The name should indicate under which entity you operate and should not cause any confusion. Additionally, you are not allowed to make any implications that you have affiliations with government agencies., as this can cause issues with subsequent processes as we will discuss later.
• The name should be unique. This means no similarities with any other entities. On the upside, the law now allows you to use a name that belongs to another entity. However, you need to get the entity’s owner’s approval in writing.

Note that the above guidelines apply to a name under which your LLC will run. If you would like to operate under a fictitious business name, this is possible via a ‘Doing Business As’, known as a “DBA.” In the U.S., a DBA lets the public know who the real owner of a business is.

Also, note that you should contact the local Secretary of State (SOS) office via phone or email, which is free. Moreover, you should check if anyone has a URL containing your chosen name, as well as trademark records.

Want to learn more? Read our full Unique Business Name For LLC

Step 2: Assign an Registered Agent

As your business will grow, there will be a lot of back and forth operations between you and the authorities. You will have to receive and react to legal documents as it pertains to your business. Without this communication, your compliance will not be in accordance with the law, and you will suffer consequences. The best way to focus on your business is to hire a registered agent (also known as resident agent, statutory agent, or agent for service of process), a third-party individual or entity who will act as your LLC’s main point of contact with Florida authorities. You can also act as your company’s own registered agent, however, acting as your own agent will have certain downsides, which include (but not limited to) the following cons:

• Possible lawsuits at your place of business; 
• Your name and address as part of your business’s public records on file with the state; 
• A lot of documents, notices, and junk mail;
• The necessity to stay at the office during normal working hour; 
• Acting as the agent only in the state where you’re physically located, etc. 

The agent should meet the following conditions:

• The agent must be at least 18 years or it can be a company that provides registered agent services;
• The agent should have a physical street address in Florida. Note that this does not refer to a P.O. box;
• The agent must be available at the physical street  address during normal working hours. This way, in the event when a delivery is necessary, the officers will find the agent at the location indicated.

Third party registered agents are often the best choice for an LLC, especially if you are running a company for the first time. Additionally, such agents provide benefits such as increased privacy, convenient handling of legal documents, and increased compliance. The price of their services is high enough, however, eventually, they are totally worth every dollar. Below are some reputable companies you can choose from:

• ZenBusiness. This company positions itself as the best registered agent service online. With ZenBusiness, you get to deal with professionals, committed to handling all documentation and correspondence with the Secretary of State, as well as other government agencies. They will ensure all of your legal and tax documents are properly managed and communicated. The pricing is also quite affordable.
• IncFile. This company allows you to enjoy a wide range of their expert services as well as excellent technical support for free during the first year. And year after, you incorporate with Incfile through any of their business plans at $125 (Silver). With IncFile, you will have a separate public-facing address for your business and stay on top of your deadlines (e.g. annual reports) to keep your business in high standing. 
• Northwest Agent Registration. – as with IncFile, you can also enjoy a year of free Northwest services. If you’re ever to get involved in a lawsuit in Florida, you can rest assured your business is properly (in a timely manner) notified with Northwest. Their registered agents have physical street location (registered offices) in the state to receive certified mail during normal working hours. Their services also include mail forwarding, expert Corporate Guides, and Privacy by Default.
• Harbor Compliance. This company has a great reputation and offers exceptional security and efficiency to multi-state organizations. With Harbor Compliances, you can save your time with their pre-filled state forms and user-friendly software. Your money is treated fairly – everything is transparent and you can also get a discount on multiple orders. HC also allows you to enjoy features like customizable notifications and annual report notices with no extra fees.
• LegalZoom. In addition to offering their outstanding agency services and extra tools, LegalZoom also offers exceptional attorney support (legal advice) to their clients without any fees or hourly rates. With LZ, you will receive timely notices about critical state filing deadlines, reliable business data protection, unlimited cloud storage for your documents, and a compliance calendar.

Want to learn more? Read our full Assign a Registered Agent

Step 3: File Articles of Organization

Since an LLC is a business structure that must be registered with a specific state, once you choose a registered agent, you need to file articles of organization. This will officially establish your LLC at the state level, enabling you to get a license needed to apply for a bank account, EIN, the rights, powers, duties, liabilities, and other obligations between each member of an LLC. You can fill out and submit online forms or download and manually fill the documents to submit.

Basic Considerations

The document must contain basic information as it pertains to your business. This includes the LLC’s name and physical address, nature of the LLC’s business to engage in lawful activities, name and address of the LLC’s registered agent, names of the members, managers, and directors of the LLC, and an effective date (the date your LLC goes into existence).

Note that when filling the date, it should be no more than five business days prior to, or 90 days after, the date the document is received by the state office. Thus, you can save the date filing as the last step to ensure you do not get disqualified over some minor issue.

Online Filing

You can visit this site to file or correct Florida LLC Articles of Organization online. Note that before filing, you must review the instructions for filing the Articles of Organization, gather all information required to complete the form, and have a valid form of payment.

Hard Copy Filing

By Mail

You can find the application on the Florida Department of State’s official website. Fill it and mail it to the following address:

New Filing Section
Division of Corporations
P.O. Box 6327
Tallahassee, FL 32314 

In Person

Follow the same guidelines as when sending by Mail and use the following address:

New Filing Section
Division of Corporations
Clifton Building
2661 Executive Center Circle
Tallahassee, FL 32301

Fees and Timings

All applications cost $125, and the processing should take between two and four weeks. Note that if there is high demand for services, you may have to wait longer before you get your LLC license.

Want to learn more? Read our full File LLC Articles of Organization

Step 4: Get an Employer Identification Number (EIN) 

An EIN is an identification number given by the IRS to businesses for tax reporting. Basically, it’s an SSN (Social Security Number) for your business. Note that you must form your LLC before getting an EIN. The IRS will request your business formation date and legal business name. So make sure you register your business and get approval for the business’s name from the state before getting an EIN.

Not everyone needs an EIN to keep doing their business. If you are in doubt, here are some considerations to make before making your decision on applying for EIN:

• Do you plan to hire employees? Businesses that have employees require having this identification for them to participate in payrolls. It’s not only beneficial to employees but to you as an employer, as well.
• Are you the only business owner? Single-owned structures do not need an EIN. 
• Is your business involved with any of the following organization types: trusts (except certain grantor-owned revocable trusts), IRAs, exempt organization business income tax returns, estates, real estate mortgage investment conduits, nonprofits, farmers’ cooperatives, or plan administrators. Positive answer means you need an EIN.
• Do you file any of these tax returns: Employment, Excise, or Alcohol, Tobacco and Firearms? If yes, you need an EIN.
• Do you withhold taxes on income, other than wages, paid to a non-resident alien? If yes, you need an EIN.

An EIN provides support in numerous instances, e.g. when opening a bank account for your business. There is a high probability that the bank will request your EIN to open the account. Not only does EIN add to your credibility but it also enables you to remain tax compliant. Plus, it also plays an important role in efficient bookkeeping. 

Application 

Getting an EIN is free and will not cost you anything. If you decide to or find that you must get it, the application can be done online or by mail as follows:

Online

Applications are possible via a virtual assistant, available as from 7 a.m. to 10 p.m. EST from Monday through Friday. Use this link to file online.  

FAX

You will have to download and fill Form SS-4 and fax it to (855) 641-6935.

Mail

For mail applications, a complete Form SS-4 should be sent to the following address:

Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999

Want to learn more? Read our full Get an Employer Identification Number For LLC

Step 5: LLC Operating Agreement

An operating agreement is not a requirement under law. However, this document can provide great benefits to your business and, thus, is highly recommended. So it’s best to make sure you have it before you start running your business.

First, it might look like there’s a lot of work to start drafting up laws to govern your practices. An operating agreement will give your business structure and official procedures. No filing or fees are involved. This document will lay out information that anyone should know about your LLC, and once you come across your first complications, you will be glad to know you have the agreement. An operating agreement will not only standardize your LLC’s processes and daily procedures, but also ensure that it runs smoothly and has legal protection. By creating this agreement, you’re building protection for your business in case any internal, external, or legal disputes.

Of course, you can choose to do without it, but the downside is that in case of any conflict situation, you will have to follow Florida’s “default rules,” which may not be “the best” for your business. 

An operating agreement sets roles and responsibilities for all members of the organization, defining the following points:

• Percentage of members’ ownership;
• Voting system, rights, and responsibilities;
• Powers and duties of members and managers;
• Distribution of profits and loses;
• Holding meetings;
• Buyout and buy-sell rules (procedures for transferring interest or in the event of a death);
• What happens if a member leaves or dies;
• Dissolution issues;

The above points are just a few examples. When drafting an agreement, you can choose between two ways:

• Guidelines from LLC members. Given that they take part in your business operations, they can indicate what they feel is right for them.
• Going the legal way. This means hiring a certified attorney who can find and fix  agreement gaps and loopholes.

Want to learn more? Read our full Create an LLC Operating Agreement

Step 6: Open a Bank Account 

Congratulations on making it this far with your account opening. Now it’s time to think about opening a bank account, separate from your personal one. The main reason for this is to ensure that in the event of any lawsuit or tax issues, only your business profits will be used for payments. If you only have a single account for everything, it becomes challenging to justify what belongs to the business. And you can end up incurring personal losses. Other reasons also include:

• Forging a long-lasting relationship with your financial partner for loans in the future;
• Increasing your credibility by using a business account for transactions.

Note that different financial institutions have different operation processes. Thus, you should search and choose your bank wisely beforehand. Generally, you will need to provide the following documents:

• Your LLC’s federal taxpayer identification number (EIN);
• A copy of your LLC’s articles of organization;
• Your LLC’s operating agreement;
• Your ID with a photo.

Additional documentation may also be required, so it’s best to make a call and check everything before you visit the bank. 

Want to learn more? Read our full Open a bank account for your LLC

Step 7: Taxation, Licenses, and Income Reports

Finally, we get to taxes. Just Like S corporations, LLCs, apart from incorporated entities, are guarded from state income taxation. Their owners also pay no tax to the state of Florida on the personal income. Here is a breakdown:

• Sales Tax. On the upside, you will not have to pay personal income tax and neither will you be expected to pay a privilege tax. However, note that if you sell physical products, it’s necessary that you get a seller’s permit. Also, note that operating in certain industries makes you liable to additional taxation. 
• For tax purposes, most, but not all, LLCs in Florida are classified as partnerships or disregarded entities. When this is the case, an LLC does not pay state income taxes since it’s not a corporation. In some rare cases, though, an LLC can also be incorporated. In Florida, this results in state income tax at either 5.5% or the 3.3% minimum tax. 
• Single-member LLCs are automatically taxed like sole proprietorships. The LLC’s income and expenses are reported on Schedule C of their personal income tax returns. Next, the net profit or loss will have to be reported under the income section of U.S. Individual Income Tax Return Form 1040. 
• No matter if you have two owners or twenty, a multi-member LLC will be taxed like a general partnership. the company’s income is reported by the members themselves on their personal tax returns. This is done with Form 1065, which reports the entirety of the partnership’s income and expenses. A Schedule K-1 will then be issued to each member that displays their  individual share of the profit. You should also be sure to include a breakdown of each member’s percentage shares in your LLC’s operating agreement. Note that your tax filing affects your federal taxes
• Make sure to check if you need a DBPR license to operate in a given industry by visiting the Department of Business and Professional Regulation website. It should contain information on any special permits you may need and applicable fees on the same.
• Re-Employment Tax is applicable to you if you have any hires in your business at a rate of 2.7% on the first $7,000 of yearly wages.

Reporting

Additionally, you need to abide by compliance rules each year. In doing so, you must file a report with the department of state through the e-Filing portal. The filing is $138.75 and should be done by the 1^st of May each year. Filing does not start during the year of formation, but rather, extends to the following year. This means that if you start your company in 2020, the filing will take place the next year before the 1^st of May. Late submissions will result in imposing a $400 late fee, and if you do not file by the third Friday of September, your entity gets automatically dissolved.

Want to learn more? Read our full Taxes and license fees

Frequently Asked Questions