If you’re a business owner working in Florida, you need to choose the best business structure for your needs. The limited liability company (LLC) is one to consider. With a Florida LLC, you protect your personal assets and realize some great tax benefits.
Read on to learn more about why you might want to form an LLC in Florida.
Understanding Business Entities
Before we look at the benefits of a Florida LLC, let’s first discuss business entities.
If you start a business without filing any paperwork to change the type of business structure you operate as, you are by default operating as a sole proprietor or partnership if you have partners. This means there is no delineation between you and your business. If you were to be sued and your business couldn’t pay all your debts, your personal assets could be seized to cover those expenses.
Then there is the limited partnership. In this case, there are multiple business owners, each with unlimited personal liability for the debts and obligations of the business.
Both the Florida corporation and the LLC remove that personal liability from the equation, as you personally are considered separate from the business. A corporation has a few more hoops to jump through to file and maintain its status than the LLC.
There are several types of LLCs. A single-member LLC has one owner (you). The multi-member LLC has, as you might guess, multiple members (another name for partners). A foreign LLC is one that was formed in a state other than where you do business, and a domestic LLC is one formed in the state where you do business.
There is the professional limited liability company, or PLLC, which is run by individuals in certain professions, like medicine or law.
It’s important to understand each type of business entity because they each have different levels of personal risk, and are treated differently for tax purposes.
Benefits of an LLC in Florida
So why is the Florida LLC worth considering? Let’s start by looking at your personal liability. With a sole proprietorship or partnership, your personal assets like vehicles or bank accounts could be seized to cover business debts. That puts you at risk.
But filing as an LLC business entity, your personal assets are considered separate and therefore can’t be taken to cover business debts. You have asset protection.
This makes more sense for certain types of businesses than others. Real estate is a great example. What would happen if a tenant hurt herself while on your property? You would be liable, and if your business couldn’t afford to pay her medical and legal bills, you might have to cover those personally. With an LLC, your liability is limited.
Another benefit to forming a limited liability company in Florida is how your income tax is filed. Rather than the LLC organization filing and paying taxes on profits, all profits and losses are passed through to your personal income taxes. This is called passthrough tax.
How to Create an LLC in Florida
Filing for your Florida LLC business entity isn’t complicated, but you can opt to hire a registered agent to handle the process for your organization. Here’s what’s involved in creating an LLC in Florida:
- Register Your LLC with the Florida Division of Corporations
- Apply for an EIN
- Create an Operating Agreement
- Open a Bank Account for Your LLC
- Hiring Employees? Register with the Department of Economic Opportunity
- Apply for a Seller’s Permit
- Comply with County and/or City Tax Requirements
Register Your LLC with the Florida Division of Corporations
Start on the Florida Division of Corporations website to create your Florida LLC online. You’ll be asked information like your company’s physical location and mailing address as well as details on who is authorized to manage the LLC. This will populate your Florida Articles of Organization, the document you need to operate as an LLC. The state fee for filing your Florida LLC articles is $125.
Apply for an EIN
Next is to get your employer identification number from the IRS. This is like a Social Security number for your business, and you’ll use it when you fill out tax documents or open a business bank account. Get your free EIN here.
Create an Operating Agreement
We’ll go more in-depth about the LLC Operating Agreement later, but as part of your steps to filing as an LLC, you’ll need to have one for your organization.
This legal document identifies the purpose of your business, its members (if you have other partners), how you will share the profits, and other important details.
Open a Bank Account for Your LLC
Next up? Opening a separate bank account for your Florida LLC. Keeping business expenses separate from personal makes tax time easier and helps you keep organized.
Hiring Employees? Register with the Department of Economic Opportunity
If you will be hiring employees in your business, you’ll first need to create an account with the Florida Department of Economic Opportunity, where you can then report and manage new hires.
Apply for a Seller’s Permit
There are several types of business licenses for different types of companies required by Florida law. You may need a Florida Annual Resale Certificate for Sales Tax, which is required for a variety of types of businesses, including restaurants, hair salons, car dealers, convenience stores, and more.
Comply with County and/or City Tax Requirements
There may be other types of licenses required by your local city or county government or taxes to be paid, so do your due diligence to ensure you’ve covered all your bases.
What is a Florida LLC Operating Agreement?
As mentioned in the steps above, it’s a good idea to create an LLC Operating Agreement to provide an overview of your company, identify the members, and list standard operating procedures.
A Florida LLC Operating Agreement isn’t required by Florida law, but it’s still a good idea to have one in place. No need to start from scratch in creating your LLC Operating Agreement; you can find a number of Operating Agreement templates online. Be sure to choose the one for your specific type of LLC (especially if it’s got multiple LLC members).
If you’ve opted to work with a registered agent, they can assist you in creating your LLC Operating Agreement.
Costs of Maintaining a Florida LLC
Once you’ve completed filing your paperwork for your LLC, you’ll need to pay the filing fee. To file the Articles of Organization, the filing fee is $100. If you need to designate a registered agent, there is an additional $25 fee.
If you would like a certified copy of your LLC paperwork, there is a $30 filing fee, and for a Certificate of Status, a $5 fee.
But you’re not done. To keep your Florida LLC active, you will need to file a Statement of Information, also known as an Annual Report, each year between January 1 and May 1. If any information about your compay or the Florida LLC members have changed, this is where you’ll report that change.
The filing fee for your Annual Report is $138.75 for a limited liability company. If you miss the May 1 deadline, there is a $400 late fee.
Working with a Registered Agent
I’ve mentioned a registered agent several times, so let me elaborate on what one is and why you might consider hiring a Florida registered agent service for your limited liability company.
Florida registered agent services can set up your Florida LLC on your behalf. They can also pay your filing fees, draft your LLC Operating Agreement, and file your Annual Report.
Florida registered agent services do charge for the services they offer, and this is in addition to any filing fees the state of Florida charges you.
Importance of Forming an LLC to Qualify for Financing
Another reason to consider choosing the LLC as your business structure is if you plan to seek a business loan for small business down the road or take on investors. Many investors and some banks only want to invest in businesses that operate as either an LLC or corporation business entity, so if you’re a sole proprietorship, you may not be eligible.
A lender or investor may ask to see your LLC’s Operating Agreement before approving you for financing.
Nav’s Verdict: Creating an LLC in Florida
Operating as a Florida LLC offers plenty of benefits to your company. The key is keeping your business entity status active and compliant, so make sure you’ve got your LLC filing deadlines on your calendar!