Florida is well-known for its retiree population, but it’s not the only thing about Florida that’s unique. Florida is the fifth-best state in the country for business taxes. It’s increasingly easy to form a new Florida company, but the details are vague to some people.
In this article, we’ll try to make the process of putting a business together in Florida a little easier to understand.
What Type of Business do You Want?
There are several different types of business structures you can look at for your company. A sole proprietorship doesn’t require any paperwork at all. If you want to have a registered name for doing business under, you’ll need to register a DBA to use a fictitious name. Sole proprietorships and partnerships aren’t the only structures available to you, however. You can also incorporate a limited liability company (LLC). According to Investopedia, LLCs are a business structure where the owners aren’t liable for the business’s debts or liabilities.
What Do I Need to Do to Register a DBA?
DBA stands for “Doing Business As,” and it’s a way to incorporate a sole proprietorship without having to use your own name. The name you decide on for your DBA needs to be unique, and no one else in the entire state of Florida can have a business with the same name. DBA’s don’t grant you any limited liability, so if your business fails to deliver, your own personal assets may be forfeit in a court matter. Once you’ve figured out a name and filed the DBA paperwork, you’ll also need to take out an ad in your local paper to fulfill the requisites for your DBA filing. Most counties in the state require you to have a professional registration or business license to operate there.
What About an LLC?
LLC filings are a bit more involved than DBAs. You start by choosing a unique name, just like in the case of the DBA. Once you’ve picked one out, you go on to file your articles of incorporation. After filing your articles of incorporation, you can go on to apply for an Employer ID Number (EIN) that will be registered with the IRS to allow you to pay taxes. You’ll also need to update your business license and open a bank account for your business that’s separate from your personal account.
What is a Corporation?
A corporation is a little like an LLC, but with a few added caveats. Corporations typically offer similar protections for limited liability, but they are taxed differently. They also have a burden of recordkeeping and are required to submit yearly reports to the state they’re registered in. To maintain corporate status, the corporation must also hold regular meetings among its board and shareholders. You cannot form a single-member corporation.
Probably the largest reason you’d opt for an LLC instead of a regular corporation is because of the taxation that both business entities have to pay. LLCs operate in an unclassified tax zone for the IRS, meaning that the LLC itself is untaxed, but the members are taxed based on their income. Corporations are considered entities in and of themselves. Members are taxed individually after the corporation has already been taxed. This is known as double-taxation and isn’t something smart business owners consider desirable.
Benefits of forming an LLC
There’s a reason a lot of potential Florida businesspeople opt for an LLCs as their preferred method of operating a business. LLCs do more than just limit the liability of its members. It can also act as a tax buffer. All in all, there are several reasons a businessperson may incorporate an LLC in Florida.
Less Paperwork to Deal WIth
LLCs typically don’t need to file annual reports in Florida. Corporations, on the other hand, are required to do so.
Pass-Through Taxation
LLCs are flexible when it comes to taxation since they don’t fit into an IRS category of their own. They can adopt the characteristics of an S-Corporation, sole proprietorship, or C-Corporation for taxation purposes. Pass-through taxation is just another way of saying that the LLC isn’t subject to the same tax laws as other corporate entities. The owners/members pay personal taxes on the money they get from the LLC, but the LLC itself never pays a dime in tax.
Flexibility in Ownership
Want to have an LLC with a single member? You can register a single-member LLC just as easily as you could register one that has several members in Florida. Ownership flexibility means that you can make the LLC operate as either a sole proprietorship (with just a single member) or a corporation without the heavy restrictions that corporations are limited to. For example, S-Corporations are limited to having a maximum of one hundred (100) shareholders, and none of them can be foreign-based.
Flexibility in profit Sharing
When you think about a multi-owner business, you usually consider that profits are distributed based on the number of shares that the member holds in the company. With LLCs, this is more of a fluid-structure. Informal or written agreements may allow owners to distribute the profits of the company unevenly, even when they may both share an equal partnership in the enterprise.
Why Do Business in Florida?
Florida is a state that has a lot of skilled talent in several fields. Doing business here gives you access to talented individuals that can help your business prosper. Additionally, thanks to their low tax rates for companies, if you incorporate an LLC in Florida, you’ll be better off when it comes to paying taxes. The tax rate on your business is zero, and the IRS will tax your earnings from the LLC as if you earned them yourself. If you’re looking for a place where you can benefit as a business owner, Florida’s exactly where you want to be.
