Many people think of Florida primarily as a state to vacation and enjoy leisure time in, but it’s also a top choice for entrepreneurs. Florida is home to 2.5 million small businesses, many of them in the tourism, agriculture, and science sectors. When starting a business in the Sunshine State, one of the first things you’ll need to decide on is a business entity type. You may want to consider starting an LLC in Florida.
The limited liability company (LLC) has been the most popular business structure in Florida for several years in a row. LLCs are easy to start and maintain, come with tax flexibility, and offer legal protection for their owners. If you want to take advantage of everything an LLC has to offer, keep reading. We’ll break down everything you need to know to learn how to form an LLC in Florida.
Forming an LLC in Florida: Step-by-Step Instructions
In order to start a business in Florida, you’ll need to go through the Florida Department of State’s Division of Corporations. The Division of Corporations sets the rules, requirements, and costs to form an LLC in Florida. You’ll also need to follow their rules if you want to operate your out-of-state LLC in Florida.
Here are some requirements for creating an LLC in Florida:
Step 1: Choose a Name for Your Florida LLC
The first step in how to form an LLC in Florida is to choose a name for your business. Like other states, Florida law requires you to choose a name for your LLC that’s different from the names of other businesses that are on file with the Division of Corporations. This requirement is designed to prevent confusion among customers and members of the public.
The name of your business must end with “Limited Liability Company,” “LLC,” or “L.L.C.” Licensed professionals in Florida can opt to form a professional limited liability company (PLLC), whose name should end with “Professional Limited Liability Company,” “chartered,” “PLLC,” or “P.L.L.C.” You can’t use certain words in your LLC’s name, such as those referencing banks, financial institutions, or agencies of the federal government.
Before establishing your business, it’s important to check if your business name is available. You can do a preliminary name search on the Division of Corporations’ business name registry. Unlike the vast majority of states, Florida does not allow you to reserve a business name. This means you should submit your articles of organization (see step 4) as soon as possible after you do a preliminary search. Otherwise, another company might claim your business name. Keep in mind that the Division of Corporations doesn’t clear names for trademark compliance. If you’re creating an LLC in Florida, it’s up to you or your business lawyer to ensure that your LLC’s name doesn’t infringe on any other company’s rights.
Source: Florida Division of Corporations
Step 2: Choose a Registered Agent in Florida
Any business that operates in Florida must name a registered agent that will accept legal and official mail on the business’s behalf. A registered agent for a Florida LLC can be an individual or a company. They will notify you if your business is sued or receives a government notice.
When forming an LLC in Florida, an individual registered agent must be a Florida resident. A company that serves as the registered agent must be a business entity authorized to operate in Florida. The registered agent must have a physical address in Florida (P.O. boxes are not sufficient). Your business can’t serve as its own registered agent, but a member or manager of the LLC can.
Many businesses find it convenient to use an online legal service to serve as their registered agent. We recommend IncFile, which is licensed to provide registered agent services in all 50 states. If you form your LLC on IncFile, they’ll even include one year of free registered agent service.
Step 3: Obtain a Florida Business License
Businesses in several industries need a business license to operate in Florida. The Department of Business and Professional Regulation licenses entrepreneurs in skilled trades, such as architecture and real estate. The Department of Agriculture and Consumer Services regulates some farm and consumer industries. Smaller agencies regulate the health fields, insurance agencies, group homes, and daycare providers. The Florida Department of State website links to licensing authorities by occupation, so you can read up on what licenses you might need when forming an LLC in Florida.
Companies that use a trade name other than the entity’s legal name must file for a fictitious business name, also known as a DBA or “doing business as” name. For example, say your business’s legal name is Joan and Day, LLC, but you operate as “Joan’s Landscaping.” You would need to register the latter name as a fictitious business name with the Division of Corporations. You’ll also need to advertise the fictitious name in a county newspaper where your principal place of business is located. Remember that your fictitious name can’t already be in use by another business. Search Florida’s business name database to ensure your name is available.
Any business in Florida that sells taxable goods or services must register with the Florida Department of Revenue. You must periodically forward the collected tax to the state and file sales tax returns. The filing deadlines for these returns vary based on the amount of sales tax your business collects annually.
The next step in forming an LLC in Florida—and the most important one—is to file your articles of organization with the Division of Corporations. Your articles of organization officially establish your authority to operate as an LLC in Florida. You can access a fillable PDF of the articles of organization, or you can e-file for faster processing. The filing fee for the articles of organization is $125.
The Florida LLC articles of organization require the following information:
- The LLC’s name and principal place of business
- Registered agent’s name and Florida street address (P.O. boxes not acceptable)
- Registered agent’s signature
- Names and addresses of the LLC’s members
- Name and address of the LLC’s manager if manager-managed
- An effective date of the LLC, if not the date of filing (optional)
- Signature of the member or authorized individual completing the form
Foreign LLCs—which are LLCs that are formed in another state but want to operate in Florida—must fill out a different form called Qualification of Foreign LLC. This form has a $125 filing fee, and you should include a certificate of good standing from your home state along with the form.
The state of Florida normally takes about one week to process articles that are filed online and a couple weeks to process articles that are mailed in. After the state approves your filing, you can download a copy of your accepted articles online and store them with your other business records. If the state rejects your articles for some reason, you’ll be given the opportunity to make corrections.
Source: Florida Division of Corporations
Step 5: Draft an LLC Operating Agreement
Under state law, Florida LLCs need not have an operating agreement. Even though not required by law, we recommend that the members of your LLC adopt a written operating agreement. The operating agreement facilitates your LLC’s daily operations and prevents disagreements among members.
At a minimum, ensure that your Florida LLC operating agreement includes the following information:
- The purpose of the LLC, including products or services offered
- The names and addresses of the members (and the manager, if there is one)
- Each member’s contributions of value to the LLC
- Each member’s ownership stake in the company, voting rights, and profit share
- The procedure for admitting new members
- The procedure for electing a manager if the LLC is manager-managed
- The LLC’s meeting schedule and voting procedures
- Dissolution terms and procedures
After creating your LLC operating agreement, make sure all members have an opportunity to review and sign it. Then, store the agreement with other important business documents. Need a little extra help to create your operating agreement? When you use IncFile to form your LLC, they can also draft a custom operating agreement for you.
Step 6: Comply With Florida Employer Obligations
In addition to the steps listed so far, Florida LLCs with employees have some additional obligations, including:
- Employee reporting: Under state and federal law, employers should report new employees within 20 days of their hire date to the Florida Department of Revenue.
- Paying unemployment taxes: New Florida employers must pay a payroll tax of 2.7% to cover state unemployment insurance, which applies to the first $7,000 in wages. Established employers will pay a lower or higher rate depending on the amount of benefits their employees claim, plus their total payroll.
- Purchasing workers compensation insurance: In most industries in Florida, employers must purchase workers compensation coverage upon hiring their fourth employee. LLC members count as employees for these purposes.
A business attorney who specializes in Florida employment law can alert you to any additional requirements and help you stay in compliance.
Step 7: File Your Annual Report
Florida is one of a small handful of states that doesn’t charge a state income tax. This means that owners of a Florida LLC don’t have to pay any state income taxes on their share of the business’s profits. This can be a big advantage for those forming an LLC in Florida.
The state of Florida does require LLCs to e-file an annual report. The purpose of the annual report is to update the business information on file with the Division of Corporations. The report is due between January 1 and May 1 of each year to avoid late fees. If not filed by the third Friday in September, your LLC could lose the authority to operate in Florida. The report should be accompanied by a filing fee, which is currently $138.75.
Step 8: Comply With Federal Requirements
There are some other costs to form an LLC in Florida, like taxes. As mentioned above, Florida doesn’t have a state income tax, but members of Florida LLCs do have to pay federal income taxes on their share of the LLC’s income. Most LLCs are treated as pass-through entities for federal tax purposes. This means that the members will report their share of LLC income on their personal income tax returns. The LLC itself won’t pay a federal income tax.
It is possible for an LLC to elect to be taxed as a C-corporation at the federal level, in which case your LLC will pay a flat 21% federal corporate tax.
Florida LLCs with employees or multiple owners, as well as those taxed as corporations, must apply for an employer identification number (EIN). The IRS will ask for your EIN when you file federal business taxes.
At the federal level, LLC members must pay 15.3% in self-employment taxes to cover social security and Medicare obligations. If you have employees, you must withhold federal social security and Medicare taxes from your employees and pay the employer share of these taxes. There’s also a federal unemployment tax that you’ll need to pay in addition to Florida state unemployment taxes.
Step 9: Maintain Your Florida LLC
Maintaining your Florida LLC is relatively simple. The most important thing to remember is to keep your personal and business finances separate. This ensures that the LLC’s members won’t become personally liable for any business debts.
To keep business finances separate, open a business bank account from one of these best banks for Florida businesses. If you use business credit cards or business loans for your Florida business, then make sure you use the money only for business purposes.
It’s also important to have regular member meetings and to document important decisions that members or a manager may take on behalf of the company.
Benefits and Drawbacks of Forming an LLC in Florida
If you’re reading up on how to form an LLC in Florida, you should evaluate whether this model is right for you. There are both advantages and disadvantages to creating an LLC in Florida. LLCs are small-business-friendly because they are relatively easy and inexpensive to form and maintain, especially when compared to corporations. However, there are also drawbacks you should consider.
- Members of an LLC aren’t personally liable for business debts and lawsuits
- LLCs have fewer recordkeeping requirements than corporations
- Florida doesn’t have a state income tax, so members can potentially save a lot of money
- At the federal level, LLC members can choose their business’s tax treatment. Under default tax treatment, LLCs avoid the double taxation of C-corporations
- LLC members must pay high self-employment taxes at the federal level
- Florida doesn’t allow name reservations for business entities
When evaluating the pros and cons of forming an LLC in Florida, keep other types of business entities in mind as well. It’s easiest and least expensive to form a sole proprietorship or partnership, though they offer little liability protection. If you’re planning to fundraise from investors, consider a C-corporation or S-corporation, which gives you the ability to issue stock.
Forming an LLC in Florida: The Bottom Line
Creating an LLC in Florida can be a good move if you’re seeking a combination of operational flexibility and legal protection. However, choosing a business entity structure is one of the most important decisions you’ll make in your journey as an entrepreneur, so we recommend walking through your options with a business lawyer. Once you’re ready to begin the steps to form an LLC in Florida, file your formation papers on IncFile to get started as soon as possible.