Guide to Starting an LLC in Florida
So you’ve decided you want to start your own business. Congratulations! The next step is deciding what legal structure to put your business in. There are a few different types of businesses, but the most common ones are sole proprietorships, partnerships, and LLCs. Let’s take a look at how to start an LLC in Florida.
What is an LLC?
The Limited Liability Company (LLC) is a popular business structure for many businesses starting in Florida. The LLC provides advantages like personal asset protection and the potential to save money on taxes. While forming an LLC can seem a little intimidating, with a little research, you can learn how to form an LLC in Florida without an attorney.
Unlike a sole proprietorship or partnership where the small business owner can be held personally liable for lawsuits against the business, the LLC is a separate legal structure, protecting the business owner’s personal assets.
Besides the liability protection, the Limited Liability Company provides several other benefits over the sole proprietorship, partnership, and corporation because of the multiple tax options, management flexibility, and fewer formalities (such as no required annual meetings) than the corporation.
Steps to Form a Florida LLC
Let’s break down the steps to complete the Florida LLC formation process.
Total Time: 10 minutes
Step 1: Choose the LLC Name
The first step in forming a Florida Limited Liability Company is to make sure the name you want is available.
The most important consideration is the name of the LLC has to be distinguishable from other registered entity names in the state of Florida. A name that is different from the name of another entity or filing due to any of the following is not considered distinguishable:
– A suffix.
– A definite or indefinite article.
– The word “and” and the symbol “&.”
– The singular, plural, or possessive form of a word.
– A punctuation mark or a symbol.
Learn how to do an LLC name search in Florida through the state’s business entity database.
In addition, there are a few restrictions to naming a Florida LLC. These include:
1) Using an approved entity designator at the end of the business name:
– Limited Liability Company
A comma may be used after the business name and before the designator. “Cowboy Cleaners LLC” and “Cowboy Cleaners, LLC” are both acceptable.
2) – The use of some words in the LLC name is prohibited, such as those that may infer a federal, state, or municipal government agency. There are additional restrictions against certain using words in the name related to professions such as attorneys, locksmiths, banks, etc., unless the business is registered to provide such services.
3) The purpose statement that is described in the Articles of Organization (Step 3), may not contain language stating or implying that the limited liability company is organized for a purpose other than what was stated.
If you plan to use a different name from the one that you register (perhaps you want to run multiple businesses under the LLC), you can use a fictitious business name, assumed name, or DBA (for Doing Business As name). The Application for Registration of Fictitious Name and the $50 filing fee will need to be sent to the Florida Division of Corporations to register a fictitious name. Renewals will be needed every five years.
Before selecting a business name, you may also want to check the name availability of a domain name is also available to have a matching website address.
Step 2: Appoint a Florida Registered Agent
To operate an LLC in Florida, a registered agent has to be identified to receive service of process. The registered agent will act as a central point of contact to receive legal documents, tax notices, summons, subpoenas, etc., on behalf of the LLC.
The requirements to be a Florida registered agent include:
– A Florida resident aged 18 or older or an entity registered with the state of Florida.
– Having a physical street address in the state (no P.O. Boxes are allowed).
– Being available during normal business hours to accept documents.
Any individual meeting the requirements can be the agent, however, the agent’s name and address becomes public record, and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when they are doing business from home or still employed. Hiring a commercial Registered Agent service like Northwest Registered Agent will help keep the owner’s names from being publicly listed.
Step 3: File the Florida Articles of Organization
The paperwork to create an LLC in Florida is called the Articles of Organization. To file, you can either file online or download the Florida LLC Articles of Organization from the Florida Department of State.
Turnaround time for the state to file the Articles of Organization is 1-2 business days when filing online or 5-10 business days when filing by mail.
If you have questions, contact the Florida Department of State, Division of Corporations.
2415 N. Monroe Street, Suite 810
Tallahassee, FL 32303
Sunbiz website: http://dos.myflorida.com/sunbiz/
Estimated Cost: 125 USD
When filling out the Articles of Organization, there are a few sections that can sometimes trip people up when seeing them for the first time. Let’s go over a few of those sections.
Effective Date – You may list an effective date if you would like the Limited Liability Company’s existence to become effective on a date other than the date it is filed by the Florida Department of State. The effective date can be up to 5 business days prior to the date of submission or up to 90 days after the date of receipt.
Principal Place of Business – In this section, enter the street address, city, state, zip code, and country of the business’s initial principal office. This address can be the LLC’s physical address, or it can be the address where the business records are kept. You may not use a PO Box for the principal place of business.
If you prefer to use a different address than the principal place of business for correspondence from the Department of State, enter that address in the mailing address field. A PO Box is acceptable.
Name and Address of Person(s) Authorized to Manage the LLC –This section asks for the name and address of each manager or representative who is authorized to manage and control the company. There are three choices listed, but you are free to use any appropriate title. The listed title definitions include:
- (MGR) – The Manager is a person hired to perform the management functions of a manager-managed LLC. This person may or may not be an LLC owner (officially referred to as a member)
- (AMBR) – The Authorized Member is an owner of the LLC
- (AP) – An Authorized Person is someone authorized to execute and file records on behalf of the LLC. Typically an attorney or accountant.
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You have a Florida LLC! Now what??
Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.
Prepare a Florida LLC Operating Agreement
The operating agreement is a document that governs the framework of an LLC. This document covers items like ownership rights, member responsibilities, how profits and losses are distributed, and more.
Florida statute does not require an LLC to have an operating agreement, but it is still worth considering. Without an operating agreement:
- The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
- Member’s personal liability protection may be diminished.
- Members may not fully understand their roles and responsibilities, which could lead to costly disputes in the future.
Obtain an EIN
The EIN or Employer Identification Number (also called a Federal Employer Identification Number, FEIN, or Federal Tax Identification Number) is a unique nine-digit number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes. The EIN will be needed in order to hire employees, open a bank account, register for business licenses and permits, file tax returns, and more.
How much is an EIN number in Florida?
There is no cost for the EIN when registering through the IRS. The number is available immediately when applying through the IRS website; however, you can also register by phone, fax, or mailing IRS Form SS-4.
Related: How to Apply for an EIN
Elect the LLC’s Form of Federal Income Taxation
One of the significant benefits of the Limited Liability Company is the tax flexibility it provides. When applying for the Employer Identification Number, you will choose how the entity will be taxed on its earnings for federal income tax purposes. While there are some limitations, an LLC may be classified for federal income tax purposes as a:
- Sole proprietorship
While this may sound confusing, this refers to how the LLC is taxed, not the legal structure.
Related: How can an LLC be taxed?
By default, the taxation of an LLC is called pass-through taxation, which means the profits or losses of the LLC flow through to the members.
Single-member LLCs will, by default, be taxed as a sole proprietorship. The members can also elect to change the tax treatment to a C-corporation or an S-corporation.
Multi-member LLCs will, by default, be taxed as a partnership. The members can also elect to change the taxation to a C-corporation or an S-corporation.
In general, the difference between being taxed as a corporation and being taxed as a sole proprietorship or partnership the profits and losses are passed to the member’s federal income tax returns based on their percentage of ownership. As a result, the owner will pay self-employment taxes on all business profits. Florida is one of a few states with no state income tax for individuals, and LLC owners are not required to pay taxes on their business income to the state of Florida.
As an alternative, electing to be taxed as a corporation allows the members to take a reasonable salary and then pay payroll taxes. Any remaining profits are distributed and aren’t subject to payroll taxes, resulting in potential tax savings. Corporate tax can be quite complicated and the C-corp may be a disadvantage for many as there is double taxation.
Before electing how your LLC will be taxed, be sure to talk with an accountant to assess which one will be best for you.
Open an LLC Bank Account
Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.
Several documents will be needed to open a business bank account, such as:
- A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
- Copies of the original formation paperwork from the state showing the creation of the LLC.
- Driver’s licenses of the LLC members.
- Depending on the LLC age, a Florida Certificate of Status may be needed to prove the LLC is active and in good standing with the state.
Apply for Business Licenses and Permits
Depending on what your business does and where it is located, there will likely be various business licenses and permits that will be needed. Some common registrations include:
- Business License – Some cities require businesses to obtain licensing before they can start.
- Professional License – Certain services such as barbershops, accountants, salons, and others must be licensed.
- Sales Tax Permit – To sell products and certain services, registration with the Florida Department of Revenue will be necessary.
File the Annual Report
LLCs are required to file an annual report each year with the Florida Department of State. This report updates ownership information and other details. The annual report fee is $138.75 and is due the first year following the LLC formation, between January 1st and May 1st. If the report is filed after May 1st, a $400 late fee is added to the cost. If not filed and paid by the 4th Friday in September, the state will dissolve the LLC.
Common Questions To Starting an LLC in Florida
How much does it cost to start an LLC in Florida?
There is a state fee for filing the Articles of Organization of $100, plus a $25 Registered Agent fee to start an LLC in Florida.
Is there a yearly fee for an LLC in Florida?
Each year, LLCs will file an Annual Report and pay the annual $138.75 filing fee.
How long does it take to start an LLC in Florida?
It normally takes 5-10 business days for an LLC to be approved in Florida when filing by mail and 1-2 business days when filing online.
For an additional fee, expedited processing is available.
Can you be your own Registered Agent in Florida?
Anyone can act as a Registered Agent, provided they are at least 18 years old, reside in the state, and are generally available to receive documents during normal business hours.
Can a single person start an LLC in Florida?
An LLC in Florida can be operated by one individual or many. An LLC owned by one person is referred to as a single-member LLC.
Does an LLC need a business license in Florida?
It’s sometimes thought that the LLC and business license are the same in Florida, but they aren’t. An LLC is referred to as the business entity, which is how the business is organized to conduct business. A business license is approval from a government entity to legally operate.
What is a Foreign Limited Liability Company?
A Florida foreign LLC is an LLC initially formed in another state but wants to physically operate in Florida. Physically operating means having a presence, such as having an office or hiring an employee.
What is a Professional Limited Liability Company?
Businesses that require occupational licensing from the State of Florida, such as accountants, attorneys, podiatrists, physical therapists, acupuncturists, etc., may file as a Professional Limited Liability Company (sometimes referred to as a Professional LLC or PLLC) instead of an LLC. Filing for a Florida PLLC is very similar to that of the LLC.