Florida LLC Guide

“LLC” stands for Limited Liability Company. This business structure is designed to provide distinct legal protections for owners and managers. LLCs are widely popular because they are efficient to establish and simple to maintain. If you look down your Main Street, you will likely find that most small-to-medium businesses operate as LLCs.

 

The primary benefit of forming an LLC is limited liability protection. This means business owners shield their personal assets like  homes, vehicles, and savings, from the debts and liabilities of the business. Forming an LLC puts up a legal wall between yourself and your company.

 

An LLC is a separate legal person. It can obtain a federal tax ID number (EIN) from the IRS, open business bank accounts, and own property in its own name.

Florida LLCs offer a range of benefits that make them attractive for both operating businesses and passively holding assets. Here are some of the top benefits of forming an LLC in Florida.

For tax purposes, Florida LLCs are treated as “pass through” entities. This means that the company is not taxed on its profits. Rather, that money is taxed after it’s been paid out to an individual. This counts as income and is reflected in the individual’s personal tax return.

The state of Florida is well known for not imposing a personal income tax on its residents. This means that any profits from business being conducted in Florida, by individuals domiciled in Florida is not subject to state income taxes. Those individuals would only have to pay federal taxes on income they receive from the LLC. 

The annual fees associated with registering a Florida LLC are relatively small. Many states require LLCs to pay an Annual Franchise Tax in order to maintain their good standing. Franchise Tax amounts can range anywhere from $300 in a state like Delaware, to $800 in a state like California for LLCs.

Florida LLCs are not required to pay an annual franchise tax to the Florida Secretary of State. Rather, LLCs just need to file an Annual Report each year to keep their good standing in Florida. There is a fee of $138.75 that needs to be paid in order to file the Annual Report in Florida. 

With a Florida LLC, business owners have the freedom to structure their company the way they want. In Florida, LLCs are governed by an internal Operating Agreement. The Florida LLC Operating Agreement is essentially a contract between the LLC Members where they agree on the ownership structure and how the company is to be run.

Limited liability protection for personal assets is the number one reason why people form LLCs in Florida. When you form an LLC, you are forming a separate legal entity. The LLCs is a distinct legal person under the law, with its own assets and liabilities.

Assets like vacation homes and boats can attract liability. Think of slip and falls, accidents, or other problems. Additionally, businesses generate all kinds of liabilities and financial obligations.  By holding property or operating a business as an LLC, you put up a wall between your own personal assets, like bank accounts and retirement savings. The liabilities generated by these properties or businesses are contained inside the LLC.

In Florida, LLCs with multiple members are exclusively governed by a charging order remedy. If a creditor of one member of an LLC attaches shares of the member, the creditor does not gain any voting power. The lien on the membership interest only entitles the creditor to the distribution of any profits associated with the interest.

Florida has a slightly different charging order law for single-member LLCs. Following a decision by the Florida Supreme Court and a subsequent law change by the Florida legislature, a creditor may foreclose on an LLC instead of obtaining a charging order if they can prove that the charging order will not be sufficient to satisfy the debt in question.

Florida does not require the names of the LLC Members in its public formation document. The Articles of Organization that are made part of the public record only require the names of the LLC Managers.

LLC Members often serve as both Members and Managers in their companies. However, if the Members of a Florida LLC were to appoint separate managers, they could avoid listing their name in the Articles of Organization.

Another differentiating factor for Florida LLCs is that they allow for foreign members while retaining their tax status as pass through entities. Other business structures, like corporations, do not permit the combination of foreign owners.

Florida does not have a minimum capital requirement to form an LLC. This means you can form an LLC in Florida without committing any assets. Some states do not allow this.

Here are the steps you need to follow to form a Florida LLC.

You can name your Florida LLC anything that you want. However, your business name has to be unique. Your business name cannot be similar to any company already registered in Florida.

By law, your LLC name also needs to include a corporate ending, like LLC, L.L.C, or Limited Liability Company. 

If you don’t want to do business with LLC in your name, you’ll need to register a Doing Business As or DBA name.

Florida state law requires you to appoint a Florida Registered Agent for your LLC. If you are not located in Florida, you need to appoint a company, like IncNow, to serve as your Registered Agent.

A Florida Registered Agent needs to meet the following requirements:

• Maintain a physical street address (not a P.O. Box) within the State of Florida.
• Be available during standard business hours (9:00 A.M. to 5:00 P.M., Monday through Friday).

The main purpose of a Florida Registered Agent is to receive “Service of Process” on behalf of the LLC. This includes official court filings, such as lawsuits and subpoenas, as well as state tax notifications.

Forming a Florida LLC requires filing Articles of Organization with the Florida Secretary of State’s office. 

The Florida Articles of Organization need to include the company name, the principal office of the business, the name and address of the company’s Registered Agent, and a list of the LLC’s managers.

The Articles of Organization can be either completed online or faxed to the Florida Secretary of State’s office. There is a filing fee of $125 that needs to be paid to the Florida Secretary of State in order to complete the filing.

Every Florida LLC should have a written Operating Agreement signed by all Members, even if the company is a Single-Member LLC.

The LLC Operating Agreement is an internal company document that explains how an LLC is structured. It records the names of the LLC Members and their respective ownership interests, while also designating Managers and outlining their specific duties. The LLC Operating Agreement acts as a contract among the Members detailing the rules for how the company is owned, managed, and operated.

Your Florida LLC should have a federal tax ID number, called an Employer Identification Number, or EIN. This is the type of tax ID number that the IRS assigns to business entities. An LLC needs an EIN number in order to pay federal taxes, hire employees, and open business bank accounts.

Business owners can apply for an EIN only after the LLC is formed. You can apply for an EIN directly through the IRS website or by mail. The application process involves completing and submitting IRS Form SS-4.

Anyone can file the Articles of Organization to form a Florida LLC without the assistance of an Incorporation Specialist. However, the complex nature of the documents in question and the duties of a Registered Agent would be well-handled by a professional Incorporation Specialist who has experience in this area. Having an Operating Agreement that precludes any disputes over the workings of the company could avoid costly potential litigation. While it is possible to form a functioning Florida LLC without using an incorporation service, their assistance is valuable to any entrepreneur or business owner.

The cost to form a Florida LLC depends on the level of service you need. The mandatory base filing fee paid to the Florida Division of Corporations is $125. 

IncNow offers two distinct formation packages for Florida LLCs:

• Basic LLC Package ($189) – The Basic LLC Package covers the filing of your Florida LLC and includes one full calendar year of Florida Registered Agent Service.
• Complete LLC Package ($298) – The Complete LLC Package includes the filing of your Florida LLC, one full calendar year of Delaware Registered Agent Service, and all necessary internal company documents, including an attorney-drafted LLC Operating Agreement.

Exclusive Offer: Use the discount code Save50 at checkout to receive $50 off the Complete LLC package.

LLCs offer several options when it comes to tax structures. By default, LLCs are treated as “pass through” entities by the IRS. This means the company itself does not pay federal income tax. Rather, business income “passes through” the LLC to its owners, who report this income on their personal tax returns.

LLCs can elect to be taxed as a C-Corporation or an S-Corporation by filing the appropriate forms with the IRS. The S-Corp election is particularly popular among entrepreneurs as a strategy to potentially reduce self-employment taxes.

An LLC Operating Agreement is a private contract between an LLC’s Members. In the Operating Agreement, the members agree on the ownership structure of the LLC as well as how decisions will be made within the company. To be legally effective, the Operating Agreement should be written and signed by all current Members.

In addition to ownership and management, the Operating Agreement should cover other important topics, such as distribution of profits amongst members, how ownership interest can be transferred, procedures for dissolving the business, additional liability protections and indemnification, and more.

Florida does impose some restrictions on types of provisions that LLC Members can include in their Operating Agreements. For example, language regarding the reduction in duties of Members and Managers, including the duties of loyalty, care and obligation of good faith and fair dealing. These are crucial legal concepts for promoting fair business practices.

Additionally, the Operating Agreement cannot restrict rights or access to records of anybody other than the Managers, Members or any assignees. The Operating Agreement also cannot modify the standard requirements for winding up the LLC.

The Florida LLC Annual Report is a mandatory, non-financial report that LLCs registered in Florida need to complete each year. The Annual Report is filed with the Florida Division of Corporations and is crucial for a Florida LLC to keep its good standing status. 

 

To file the Florida Annual Report, you will need to provide your company’s Florida file number. You can find the Florida file number in the company’s Articles of Formation. The Florida Annual Report requires the following information:

 

• • Company Name – The company’s full corporate name;
  • Tax ID Number – Federal Employer Identification Number (FEIN/EIN);
  • Principal Office Address – The principal office address of the company;
  • Mailing Address – The company’s mailing address (if different from the principal office);
  • Officers and Directors – The names and addresses of all officers and directors; and,

• Email Address – A valid email address of official communications from the Florida Division of corporations. 

 

There is a $138.75 fee that needs to be paid in order to submit the Florida Annual Report. The report is submitted online at the Florida Division of Corporations website sunbiz.org.

The Florida Annual Report needs to be filed before May 1st of each year. The state of Florida charges a $400 late fee for late Annual Reports.

This is how Florida LLCs compare to other types of business entities.

A sole proprietorship is a label given to individuals who operate a business without forming a legal entity for themselves, like an LLC or corporation. If you start selling flowers on the corner of your street without forming a company, you are operating as a sole proprietorship.

 

The main difference between LLCs and sole proprietorships is that sole proprietors do not have any limited liability protection. They are personally responsible for any liabilities generated by the business. 

 

Sole proprietorship can also apply to individuals who passively hold assets in their own name rather than within an LLC. For example, investors who own real estate personally and not inside of an LLC expose their personal assets to liabilities that are generated by that property.

LLCs and corporations are two types of legal business entities that provide limited liability protection for owners and managers. However, there are key differences in how these entities are structured and operated.

State laws require corporations to have a rigid structure made up of shareholder, directors and officers:

 

• Shareholders have ownership in the company.
• Directors appoint officers and make high-level business decisions.
• Officers oversee day-to-day operations.

 

LLCs are more flexible than corporations. LLCs consist of Members who own the company and may or may not manage it directly. Members can choose to have separate Managers handle specific responsibilities in the business.

 

While corporate governance is heavily regulated, LLCs benefit from the “freedom contract”. Members of an LLC can arrange the ownership and management of the business however they see fit, so long as they agree to the terms. These terms should be put into writing in the form of an LLC Operating Agreement which is then signed by all of the Members. 

 

Additionally, corporations have more annual requirements to complete, like filing an Annual Report. 

The S-Corp, short for S Corporation, is not a type of business entity. The S-Corp is a type of tax election an LLC can choose to make with the IRS. Businesses taxed as S-Corps pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes.

The S-Corp election is made by LLCs that are generating business income. LLCs used to passively hold assets typically do not benefit from making an S-Corp election.

Like the S-Corp, the C-Corporation (C-Corp) is a tax election that an LLC can choose to make. C-Corps pay corporate income tax on their profits. That money is taxed a second time at the individual level when profits are distributed to owners as dividends. LLC owners can choose to have their company treated as a C-Corp for federal tax purposes by submitting the necessary election forms to the IRS.

An LLC can own virtually any asset that can be titled to a legal entity. This includes:

 

• Real estate, like rental properties or vacation homes.
• Tangible property, like vehicles, boats, aircraft or equipment.
• Financial assets, like investment portfolios.
• Intellectual property, like patents, trademarks and copyrights. 

Owning assets through a Florida LLC is a strategy primarily used to create a boundary between your personal wealth and your business or investment activities. Titling liability generating assets under an LLC generally shields your personal assets – like your home, vehicles and personal bank accounts – from being impacted by those liabilities. 

 

This concept is called limited liability protection. If an asset owned by an LLC, like a rental property or investment fund, is involved in a lawsuit, that risk is limited to the assets held inside that LLC. The LLC owners and managers are protected. 

 

Owning assets through LLCs can also be beneficial in the context of estate planning. Transferring ownership of an LLC to your heirs could potentially be simpler than transferring physical property titles.