Sunshine and beaches aren’t the only great things about Florida. The Sunshine State is also an awesome place for small business owners! Between January 2021 to January 2022, Florida had the highest number of new business applications in the US, according to the US Census Bureau. Florida also has no income tax, along with other appealing tax policies, and has the sixth lowest tax burden in the US.
LLCs (or limited liability companies) in particular are the most popular business structure in Florida for small business owners. That’s not surprising, since the LLC structure provides small business owners with tax benefits and personal protection from legal and financial liabilities. Sound intriguing? Read on for everything you need to know about starting an LLC in Florida!
How to start an LLC in Florida
Before we get into how to start an LLC in Florida, let’s define what an LLC actually is. LLC stands for “limited liability company,” which is a type of business structure. LLCs are a popular choice because of their flexibility; they give you the legal and financial protection of a corporation and the tax benefits of a sole proprietorship.
Now that that’s out of the way, let’s go over the steps to getting your LLC off the ground. Here’s a taste of what we’ll cover:
- Naming your Florida LLC
- Selecting a registered agent for your LLC in Florida
- Filing articles of organization for your Florida LLC
- Drafting a Florida LLC operating agreement
- Obtaining an EIN (Employer Identification Number) for your Florida LLC
- Obtaining a Florida business license (if necessary)
- Deciding how you want to be taxed
- Setting up a business bank account
1. Name your Florida LLC
How hard can choosing a name be—just whip up something fun and catchy and you’re done, right? Not so fast! Legally, you need to ensure your business’s name is not the same as any other business in Florida. You can verify this with the Division of Corporations’ business name registry.
You are also responsible for making sure your business name doesn’t infringe on another company’s trademarks. Furthermore, it’s a good idea to make sure a web domain is available for your business name—it’s better to check now than find out all the different iterations of your business name are taken after you’ve already registered your name (...think of the paperwork! *clutches pearls*).
Your business name shouldn’t allude to any illegal activities or involvement with any government agencies or financial institutions. Additionally, your business’s name needs to end in “Limited Liability Company,” “LLC,” or “L.L.C.”
If your LLC is a professional LLC (meaning your business offers services from a licensed professional), it should end with “Professional Limited Liability Company,” “chartered,” “PLLC,” or “P.L.L.C.” Hot tip: Including certain words like “lawyer” or “doctor” may require specific licensing.
2. Select a registered agent for your LLC in Florida
A registered agent is a person or an entity who will receive legal documents and communicate with the state on behalf of your business. They are a requirement when forming an LLC in Florida. If your registered agent is a person, they must be an official Florida resident. If your registered agent is a company, they must be legally allowed to work in Florida and have a physical address in Florida.
We know what you’re thinking: No, your business can’t be its own registered agent. But a member of your LLC (including yourself) can! However, most small business owners prefer to get a professional registered agent for the peace of mind, which can cost between $50-300 per year.
3. File articles of organization for your Florida LLC
And now for the most important step (drum roll, please): filing your articles of organization with the Division of Corporations. This is the juiciest part, because your articles of organization will officially allow you to create your business! The filing fee is $125, and you can apply online or by mail. Here’s the information you’ll need to fill out in your articles of organization:
- Your LLC’s name
- Your LLC’s location
- Your registered agent’s name and their address
- The signature of your registered agent
- The names and addresses of your LLC’s members and/or managers
- Why you formed the LLC
- How long your LLC is expected to exist (can be indefinite or “perpetual”)
- The signature of whoever filled in the form (this could be you or another member)
If you already have an LLC formed in another state but want to operate in Florida, you’ll need to file the Qualification of Foreign LLC from, which also costs $125.
If you file online, it should take around one week for Florida to approve your filing. It could take a couple of weeks longer if you mail your articles in. On average, the waiting time is between two to four weeks.
4. Draft a Florida LLC operating agreement
An operating agreement isn’t a legal requirement, but it will make your life a whole lot easier. Having an operating agreement in writing adds clarity to your business's operating functions and ownership and helps you avoid any sticky situations with other members. Here’s what we recommend including in your operating agreement:
- The purpose of your LLC
- The names and addresses of members and/or managers
- What each member or manager does within the business
- How much authority each member has, including their ownership stake, voting rights, and profit share
- How new members and managers are elected
- A meeting schedule
- How voting works
- Terms of dissolution
Make sure each member signs the agreement, and be sure to store it in a safe place. You don’t need to file it with the government or anything, it’s just for you and your LLC.
5. Obtain an EIN (Employer Identification Number) for your Florida LLC
An Employer Identification Number (EIN) is a unique number assigned by the Internal Revenue Service (IRS) used to identify your business. It lets you open a business bank account, get loans, establish credit, hire employees, and apply for business licenses. You will need to register for an EIN if your LLC has employees, has multiple owners, and/or has elected to be taxed a corporation. Either way, an EIN is a super useful thing to have, so we always recommend getting one.
6. Obtain a Florida business license (if necessary)
Any businesses that sell goods or services will need to get a business tax receipt (which is a general business operating license) and an Annual Resale Certificate for Sales Tax (which is similar to a seller’s permit). Depending on your industry, you may also need to apply for licenses on the local, state, and/or federal level. Generally speaking, you’ll need additional licenses and certifications if you do work that involves extensive training or that may potentially put your customers at risk (like accountants, engineers, food services, medical professionals, cosmetologists, etc.).
A Doing Business As (DBA) registration is necessary if the name you registered your business under is not the same as the name of your business. For example, let’s say you filed your legal business name as “Joe’s Cheese Emporium, LLC.” (Oh yeah, we forgot to mention that your name is Joe in this example… Or your name is not Joe but you just really like the ring of it.) However, you decide to operate as “Joe’s Fine Cheeses.” In this case, you need to register “Joe’s Fine Cheeses” with the Division of Corporations.
For more information, check out our article on how to start a business in Florida!
7. Decide how you want your Florida LLC to be taxed
LLCs give you the power to choose how you want to be taxed: either as a pass-through entity or a corporation.
If you are the only member of your LLC (meaning you have a “single-member” company), you’ll be taxed as a sole proprietorship. Your LLC doesn’t pay taxes, and you’ll report all the profits (and losses) on your personal tax return. This is an example of pass-through taxation.
If there are multiple members (meaning you have a “multi-member” company), you can choose to be taxed as a pass-through entity or a corporation. If you opt to be taxed as a corporation, your LLC will need to pay the 21% federal tax rate and file separate Florida business taxes.
The amount of state-specific taxes you pay will depend on your location and how much money your business is bringing in.
8. Set up a bank account for your LLC in Florida
Florida requires LLCs to have their own business bank account in order to do business (this is where an EIN will come in handy).
If you don’t separate your personal finances and assets from your business finances and assets, they are up for grabs if your LLC gets sued… Which basically defeats the purpose of the “limited liability” part of LLCs. Aside from protecting your personal assets, another added bonus is that a business bank account makes bookkeeping and tax time waaaayyy easier.
Further Florida LLC considerations
Beyond the eight steps required to form an LLC in Florida that we just discussed, there are other considerations at play once your LLC is established.
Comply with Florida employer obligations
If you’re planning on hiring employees for your LLC, there are particular obligations you should be aware of in Florida. Here are some of the most important ones to have on your radar:
You need to report all new hires (even if they were rehired) within 20 days to the State Directory of New Hires of the Florida Department of Revenue to help protect against unemployment fraud. If you hire independent contractors or freelancers and pay them over $600 for their services within the calendar year, they also need to be reported within 20 days of their start date or their first payment, whichever happens first.
Unemployment tax payments
Florida does not have state withholding taxes (unlike other states), but it does have unemployment insurance (UI) tax that needs to be paid. UI tax, also known as “reemployment tax,” goes into unemployment compensation programs that help job seekers find employment (hence the name).
In order to set your business up for UI tax, you’ll need to create a reemployment tax account with the Florida Department of Revenue online or by mail. After that, you’ll get a reemployment tax account number.
Reemployment tax reports and payments are submitted on a quarterly basis, on or before April 30, July 31, October 31, and January 31. Your Reemployment Tax Rate can be found on Form RT-20 (Reemployment Tax Rate Notice), which you should receive from the Department of Revenue. The tax rate for new employers is 2.7%, which is applied to the first $7,000 paid to each employee; any wages after that will not be taxed for the rest of the year.
Obtaining workers’ compensation insurance
If you have over four employees working either part-time or full-time, you need to purchase workers’ compensation insurance. It helps cover medical expenses and lost wages if an employee is injured and legal fees if an employee sues you. It also helps you stay compliant and avoid any penalties or criminal charges.
File annual reports for your Florida LLC
Even though Florida doesn't have state income tax, it does require LLCs to file an annual report with the Florida Department of State online. This helps you stay compliant with the Division of Corporations, who will use your annual report to update your business information on file. It’s due to the Division of Corporations between January 1 and May 1, and costs $138.75 to file.
Establish accounting best practices
The key to keeping you and the IRS happy? Establishing accounting best practices to manage your finances. It’ll help you stay organized and save yourself a bunch of headaches at tax time.
You can hire a business accountant, or consider business accounting software like Wave to help manage your finances. Wave provides easy-to-use software for small business owners that helps you stay on top of bookkeeping and always be tax ready. We recommend taking care of your accounting in one place, like Wave, because it will make your life a lot easier.
Advantages of starting an LLC in Florida
Now that you have a sense of what you’ll need to do to form an LLC, let’s get into why you should do it. LLCs come with a lot of advantages, which is why they’re such a popular choice for Florida business owners:
- Limited liability protection: Protects you and any other members from being personally responsible for any lawsuits, debts, or other liabilities incurred by your business.
- Tax options: You have the power to choose which method is most cost-effective for you: being taxed as a corporation or pass-through entity.
- Pass-through taxation: The profits (and losses) from your business “pass through” your business’s tax return to your personal tax return, so they’re taxed only once at your personal tax rate.
- No income tax in Florida: In other words, more money in your pocket.
- Flexibility: You can have as many or as few members as you want, and you can decide how much responsibility each member has.
- Business loan access: LLCs build credit faster, which means they can access loans quicker.
- Simplicity: LLCs are fairly easy to form and maintain (without too much paperwork), especially compared to corporations.
- Credibility: LLCs are viewed as a more formal and reputable business structure compared to sole proprietorships or partnerships.
Disadvantages of starting an LLC in Florida
Okay, let’s cover the disadvantages of starting an LLC now:
- Expensive: LLCs are usually pricier to establish compared to a sole proprietorship.
- Harder to find investors: Investors may feel less confident about this business structure, and therefore less confident about investing. Additionally, most investors prefer corporations over LLCs because they can own shares of the company.
- Problems with ownership: Compared to a corporation, it can be harder for LLCs to transfer ownership. Additionally, even if there are multiple owners, one owner has the power to disband the entire company.
Are you ready to start an LLC in Florida today?
Now that you know the ins and outs of forming an LLC in Florida, you’re all set to make your business ownership dreams come true. To really solidify everything we covered, here’s a recap of the eight easy steps to propel you into Floridian business ownership:
- Follow naming guidelines in Florida and register your business name
- Get a registered agent in Florida
- File articles of organization to officially create your business!
- An operating agreement helps organize you and any members and managers of your business
- An EIN is your golden ticket to building out your business
- Do research on what local, statewide, and federal licensing you need to obtain since it depends on your industry
- Decide how you want to be taxed: as a corporation or a pass-through entity
- Set up a business bank account to make bookkeeping and tax time easier
- Make sure you stay compliant with employer obligations if you have employees or contractors
Starting an LLC in Florida is no small feat, so congratulations on taking the first step by reading this article! If you have any questions about starting an LLC, on anything from accounting to taxes or paperwork to payroll, our team of small business pros can provide you with personalized, 1:1 assistance.
The information and tips shared on this blog are meant to be used as learning and personal development tools as you launch, run and grow your business. While a good place to start, these articles should not take the place of personalized advice from professionals. As our lawyers would say: “All content on Wave’s blog is intended for informational purposes only. It should not be considered legal or financial advice.” Additionally, Wave is the legal copyright holder of all materials on the blog, and others cannot re-use or publish it without our written consent.