Are you looking to kick-start your business in Florida by incorporating an LLC? Excellent choice! Florida is a great destination to incorporate your LLC, given the income tax exemption for LLCs and liberal business regulations in the State. However, the procedure for setting up an LLC in the State may seem confusing and complicated.
We will walk you through the process of incorporating an LLC in Florida step-by-step and break down the nitty-gritties of the procedure.
Naming Your Florida LLC
The name of your business is the first thing your customers will see. It also appears on all legal documents, contracts, and business accounts. So, having a unique and catchy name ensures you can differentiate yourself from competitors while attracting new customers. Make sure that you have a unique name that captivates your customers.
While naming your LLC, you must follow all the naming guidelines the State of Florida has laid down.
The name of your business should have the words “limited liability company” or one of its abbreviations (LLC or L.L.C.).
It cannot also have any words or abbreviations that imply it as being associated with or part of the State agency. Therefore, you cannot use terms like “F.B.I.” or “Treasury.”
The name you choose for your LLC must be distinguishable from the names of other entities incorporated in the State. You cannot claim distinguishability based on minor changes like changes in the singular, plural, and possessive forms of words.
Similarly, usage of certain words, like “Bank” or “University,” is restricted and involves obtaining the written consent of concerned authorities and additional paperwork and compliance requirements.
Does your business require a DBA?
Filing a doing business as (“DBA”) or fictitious name is helpful if you want to conduct the business under a different name. For example, your LLC’s name may be sufficient to represent your brand, and you can conduct any day-to-day operations under the same name.
However, you may want to devise a new branding strategy, in which case, you should obtain a DBA. Once you obtain a DBA, it is valid for 5 years, post which you will need to renew it.
Before you can get your DBA registered, the State mandates that you make a publication of your intention to file a fictitious name. A Notice to this effect must be published once in a newspaper having wide circulation in the respective county where your LLC is located.
For more information in this regard, you may read Chapter 50 ( Legal and Official Advertisements), title VI (Civil practice and procedure) of the 2022 Florida Statutes.
Doing a Name Search and Name Reservation
You can use the Division of Corporations’ website to do a business entity name search to check for the availability of the name you have chosen for your LLC.
You may have zeroed in on a name but might not be ready to incorporate your LLC. In such instances, you may apply with the Secretary of the State to have the name reserved. There are no online application portals or forms for this purpose. You are required to send a request letter addressed to the office of the Secretary of State. The letter must clearly state details such as the name to be reserved and the name and address of the applicant.
Once the Secretary of State has reviewed the application, the name shall be reserved, for 120 days, in the name of and for the applicant’s exclusive use. For more information, you may read the Division FAQs (Public Inquiries & Entity Name Searches) section of the Department of State’s website.
Registering Your Business Domain
With the growing influence of the internet and online business, it would be prudent to set up an online presence for your business.
The address of your website is how customers find you online. So before you select a name for your LLC, it is recommended that you ensure that the domain name you need is also available.
You can check currently available domain names.
Choose a Registered Agent in Florida
A Registered Agent is an individual or another business entity responsible for receiving all official communication on behalf of the LLC. They act as a liaison between the LLC and the State of Florida.
The registered agent shall also receive any process service concerning a lawsuit against your company. You must select a registered agent before your company can start functioning.
Who can be a Registered Agent?
Anyone, including your family, friends, or another entity, can be a registered agent. However, the State laws provide specific requirements that your registered agent must comply with. The agent you select for your LLC must be:
- An individual State resident (above 18 years) or
- A business entity that has obtained authorization to conduct business in the State.
The registered agent should be available during business hours on all working days. Failure to have a registered agent can lead to penalties such as administrative dissolution, i.e., inability to do business in the State.
Individual v. Registered Agent Service
While you can appoint yourself as the registered agent, it may not be advisable for all businesses. You should hire a professional registered agent service as it has many advantages.
It gives you flexibility since you would not be needed to be available during office hours to receive legal papers. A professional registered agent service ensures that you don’t fail to duly respond to any notice or other communication that may be sent to your LLC. They remind you when your returns and other filings are due and help ensure you don’t miss any deadlines. Professional help lets you focus your energy and time on core business areas.
If you are a home-based business or are generally concerned about your privacy, having a registered agent service will ensure that your address is not present in the official records in the public domain.
You can do a simple online search to find a service that best suits your needs and finances.
Filing the Articles of Organization with Florida
Filing the Articles of Organization is one of the most critical steps while forming your LLC. It necessitates your business to provide information about how it will function. In addition, the articles spell out your company’s structure and give your LLC its legal recognition as a business entity.
Details required for your Articles of Organization:
- Name of your LLC
- Registered agent’s name and address
- Address for your principal office
- Member or Manager managed
- Effective date
- Signature of a member/authorized agent
You can get a certified copy ($30 extra) or a certificate of status ($5) while forming your articles of organization.
A certified copy is a legally legitimate and approved copy of your documents. The certification attests to the document’s accuracy and truthfulness.
A certificate of status verifies that a business is lawfully established with the State, that all registration fees and mandatory document requirements are complied with, and that the LLC is legally authorized to conduct business in the State.
Post-approval by the Florida Department of State, you can expect to receive your approval copy in the mode of your application.
You can file your Articles of Organization online or mail them to the Florida Department of State. The approval process is quicker online, and approval time is around 1-2 working days from filing your application.
As of now, the State does not have any provisions pertaining to expedient processing of your Articles of Organization.
Public Notice of Formation
As of now, the State does not have any provisions pertaining to a mandatory public notice of formation for your LLC.
Create the Operating Agreement
An operating agreement is a legal document. It lays down the rules of your LLC’s internal operation and functioning. Suppose you have three members in your LLC. Who gets to make decisions in the day-to-day operations? How are profits shared? All these questions need clarity.
If there are no clear rules of operations, disputes can arise, which will end up affecting your business. An operating agreement acts as a guiding force in matters of the day-to-day functioning of the LLC.
Even though an operating agreement is not mandated by the laws in the State, you should have one. It offers credibility to your enterprise. You will need an operating agreement for opening an account with the bank. More importantly, it helps protect the LLC’s limited liability status by reinforcing it.
There are no prescribed templates for an operating agreement.
However, irrespective of the nature of your business, it shall be advisable for your operating agreement to cover the following matters:
- Organization Details
- Duties of Members and Managers
- Management and Voting
- Capital Contributions
- Division of Profit and Losses
- Bookkeeping Procedures
- Procedure for adding new members
- Requirements concerning Meetings and Procedures thereof
Writing the Operating Agreement Yourself v. Hiring a Service
You can create your own operating agreement yourself. There are templates available for purchase online, which you may modify to suit your needs.
You can contact an attorney to prepare or review your draft if you are concerned about leaving out essential information. This can guarantee that the contract complies with all applicable laws and is not subject to the State’s default laws.
Limits of Operating Agreement
There are some restrictions on the provisions you can include in your operating agreement. The Florida Statute dictates that your operating agreement cannot contain provisions that:
- Remove duties of care between the members.
- Restricts the rights of a person who is neither a member nor a manager.
- Limits access to the LLC documents.
Obtaining an EIN for your Florida LLC
The Employer Identification Number (“EIN”) is a nine-digit number used by the Internal Revenue Service (“IRS”) to identify a company for taxation purposes. If you want to employ people for your company, you will need an EIN.
If you are a single-member LLC, you don’t need to obtain a separate EIN unless you’re looking to employ people.
However, you’ll need your LLC’s EIN to create an LLC business checking account. Also, you will need it for registering for various company licenses and permissions.
The IRS issues an EIN, and you can apply for it online or through the mail.
Annual Reports For Your LLC
An annual report is a document used by the authorities to get the latest and updated information about all the business entities operating in the State. It needs to be filled every year by your LLC.
To maintain your LLC’s “active status” and avoid unwanted penalties, all LLCs in Florida must file an Annual report.
You can only file this report online between 1st January and 1st May by paying a fee of $138.75.
Filing the report after 1st May can attract penalties. The late fees are $400. In addition, the Department of State for Florida will close down your company after the 4th Friday of September if you continue to neglect the Annual Report filing.
This annual report always follows the year after your LLC formation. So, for example, if you formed your LLC in 2021, your LLC will only be due from 2022.
Tax Liability For Your Florida LLC
The way your LLC will be taxed depends upon the number of members in your LLC. There are four ways in which LLC will be taxed:
- Sole proprietorship: a business owned by a single person
- Partnership: a business owned by multiple people
- C – Corporation: income is split or segregated for taxation
- S – Corporation: tax liability is split between the business and its owners
Federal Tax Liability
The Federal Tax liability of your LLC will depend on the number of members you have and how you choose to treat your LLC for taxation purposes. If you would like your LLC to be taxed like a C-Corp or S-Corp, you can do so by filing Form 8832 and Form 2553, respectively.
On the other hand, if your LLC is multi-membered, it will be taxed as a ‘partnership’ by default. In this case, apart from filing Form 1040, you’ll have to file your partnership return in Form 1065 and provide information in the K-1 of each partner.
You must pay Federal self-employment tax (presently 15.3%) on the profits you take from your LLC. You are eligible for certain deductions like business expenses. You are also liable to pay Federal Income Tax. The income tax you have to pay will vary depending on your income, filing status, deductions, etc. However, federal corporate taxes must be paid if you treat your LLC as a corporation for tax purposes.
State Tax Liability
LLCs are, by default, treated as ‘pass-through tax entities.’ It means your LLC itself does not pay the taxes. Instead, the members pay taxes on their income from the LLC. However, Florida does not impose any State income taxes. Therefore, if you treat your LLC as a pass-through tax entity, the members need not pay any income tax. Florida also does not charge any tax on the privilege of doing business in the State.
In case you choose to treat your LLC as a corporation, State corporate taxes will apply to your LLC. Florida’s corporate tax rate is 5.5% of federal taxable income.
If your LLC is engaged in selling certain physical products or specific services, you will be required to pay Sales Tax in Florida. You will have to register your LLC with the Department of Revenue to obtain a Certificate of Registration (Form DR-11). After that, you will need to file your sales tax returns. For more details in this regard, please visit the DOR website.
Depending on the business you run, you may need to apply for various taxes like the Unemployment or the Sales and Use tax. You can check for all the categories to apply for here at the Florida Revenue Department website.
Permits and Licenses
You’ll need to get the required business licenses and permits after forming your Florida LLC to function legally. Depending on the nature of your business, you may be subject to three licensing jurisdictions: Federal, State and Local.
Federal Licensing requirements will depend on the business activity carried on by your LLC. If your company is engaged in any area of business regulated by the Federal Government, you will be required to obtain relevant Federal Licenses and Permits.
Some business activities requiring Federal Licenses and Permits are Agriculture, Alcoholic beverages, Aviation, Firearms, ammunition and explosives, Fish and Wildlife, Commercial fisheries, Maritime transportation, Mining and drilling, Nuclear energy, Radio and television broadcasting, and Transportation and logistics.
There is no general business license in Florida. Therefore, your LLC’s requirement for business licenses and permits will be determined by its location and the type of its operation. However, if your business transacts in goods or services subject to sales tax, your LLC must obtain a seller’s permit. In Florida, a seller’s permit is called the Annual Resale Certificate for Sales Tax. To apply for this certificate, visit the Florida Department of Revenue website.
Depending on where you operate your business, you may also be required to get the local government’s license and permit. Get in touch with your local Florida government office to know more about local licensing requirements.
For more information regarding;
- Federal Permits and License
- Florida Division of Library and Information Services
- Florida Business Resource page
Business Bank Account & Phone Number
Double-check that you have a separate corporate and personal account after forming an LLC. Mixing your business and personal accounts is terrible since it endangers protecting your assets if your LLC is issued later. However, it also helps in the case of calculating and keeping track of taxes.
Members who want to be approved signers on your Florida LLC bank account should be present when the account is opened.
When you open a bank account, you will receive a credit and debit card. The credit card assists in the development of your LLC’s credit history. This is quite useful when it comes to raising funds for your LLC or qualifying for loans.
Instead of using your home or mobile phone, you may get a low-cost “virtual business number” specifically for your Florida LLC. You can then forward calls to this company number to your smartphone. Utilize any service that may assist you with personalizing call forwarding, setting up pre-recorded instructions, and so on.
This unique phone number also protects your privacy from intrusive public record websites.
Florida is an excellent choice to your set up your business. The Sun Shine State is home to many thriving small and medium businesses. The State also offers many tax benefits and business incentive programs that are all aimed at helping newly formed businesses to grow in the State. The Qualified Target Industry Tax Refund (QTI) and the Capital Investment Tax Credit (CITC) are examples of such schemes. Get in touch with your local county or city government office to determine if your LLC is eligible for any of these incentives.
With the last step, you will complete all the procedures required to form an LLC in Florida. However, if you are hesitant about any procedure, you can always use a professional service that suits your needs.