LLC Florida - How to start your new business
Did you know that in many cases, as a business owner you can be required to use personal assets – a home, car, or money in bank or investment accounts – to pay off debts or lawsuit settlements for your business? If you are starting a new business in Florida, you should consider how you can protect your personal assets. One possible solution to protect your assets is to register your company as an LLC. At LLC Formations, we have the expertise and the tools to help you create and register LLC in Florida.
Benefits of an LLC
An LLC is a Limited Liability Company. LLCs are companies that can be owned by one or more members. The term “limited liability” means that the members are not responsible for the debt of the LLC, nor are they personally, legally responsible if the LLC is subject to a lawsuit. This means that creditors sue the LLC, the owner’s personal property – cars, homes, personal investments – is protected as long as the owner conducts the business legally and keeps personal and business funds separate.
An LLC not only protects the individual owner’s personal assets from lawsuits; it also gives the business more credibility, prevents double taxation, and has fewer regulations than a corporation. An LLC does not pay income taxes. Instead LLC members have some choice in how they are taxed. They may be taxed as either a single proprietor, a partnership, or a corporation. Both the single proprietor and partnership options allow the owners to avoid being taxed twice because the income is reported on the individuals’ tax returns. For the purposes of taxation only, then, the LLC is considered a disregarded or pass-through entity by the IRS.
In addition, becoming an LLC makes a company more credible. Lenders, for example, often prefer companies that minimize personal liability as they are often more stable. Vendors and potential partners may also prefer the stability that an LLC offers.
Finally, there are fewer regulations at the start-up of an LLC than there are for corporations. LLCs do not have to assign officer roles, hold yearly meetings, or record meeting minutes. Also, the paperwork for starting an LLC is much simpler to complete.
In rankings of the best states in which to form an LLC, Florida consistently ranks in the top ten. According the Tax Foundation, Florida’s zero percent income tax rate and its relatively low corporate tax rate of 5.5% contribute to its rank in the top ten. In addition, Florida has a number of tax exemptions that benefit businesses, often leading to them paying no taxes at all. All of these factors combined make forming an LLC in Florida a good idea. However, if you are unsure of how to create an LLC in Florida, we at LLC Formations have your back.
How to Start an LLC in Florida
So, if you believe it is in the best interest of you and/or your business partners to register an LLC in Florida, here are the steps for how to form an LLC in Florida. For each step of this process LLC Formations provides a service to help streamline the process and to make sure that you receive up to date legal advice, filing services, and tax advice.
Note: If you not a citizen of Florida or are not a United States citizen and are interested in forming a Foreign LLC, the process is similar to the ones that follow, but you will have some different forms to complete and some slightly different rules to follow. You can find that information under the Foreign LLC Forms section of the Florida Division of Corporations page.
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1. Naming Your LLC
For the exact wording of the statute that delineates the requirements for naming your LLC visit the Florida Legislature’s Online Sunshine page. A summary of the statute follows.
Before you file your paperwork with the Florida Department of State, you will need a name for your LLC that is both unique and distinguishable. The name of your LLC must not closely resemble the names of other businesses in the state, nor can it violate any trademarks. You can check the Florida Division of Corporations website to see if your business name matches any names of current Florida businesses and the United States Patent and Trademark Office to see if your name contains any trademarked words or phrases. You can also perform a Florida LLC lookup to get ideas about how to name your LLC.
Florida law requires that the name of your company include the designation Limited Liability Company, LLC, or L.L.C. Naming guidelines also require that you do not include words that would lead others to confuse your business with a government agency, e.g. FBI, IRS, and Department of Defense. Your LLC name also may not include words such as “insurance company” or “attorney,” which may require additional paperwork and licensing. For a complete list of non-distinguishable factors and the answers to other LLC naming FAQs, please visit the Florida Division of Corporations FAQ page.
When choosing an LLC name, it is also a good idea to consider whether the domain name is available. While you might not plan to construct your website immediately, you will most like want a website in the near future. It is a good idea to plan ahead and see if a domain name is available for your chosen LLC name. You can use one of many online domain name sites to check on the availability.
LLC Formations offers services that will help you to name your company and to obtain the rights to trademarks for your LLC.
2. Obtaining a Florida Registered Agent
A registered agent is your LLC’s main contact with the state. The agent is the reliable person located in the same state as the business entity who agrees to accept legal mail on behalf of the LLC. In other words, the registered agent is the responsible party selected to receive all legal documents and mailings: tax forms, service of process notices, government correspondence, lawsuit notifications, etc. The resident agent is sometimes also known as Statutory Agent, Statutory Agent for Acceptance of Process, or Agent for Service of Process.
You can be the registered agent of your own LLC, choose a friend or family member to stand in as your agent, or designate a company as your agent. In order to be a registered agent, an individual must be a resident with a legal address in the state in which the LLC is being formed. The agent must be at least 18 years old and be available to receive documents during regular business hours, Monday through Friday, 9 a.m. to 5 p.m. If the registered agent is a company or a commercial registered agent, then the company must be registered in the state in which you are forming your LLC.
Pros and Cons of Hiring a Registered Agent
The main disadvantage of hiring a commercial registered agent is that it will cost you money. Registered agent services charge annual fees and the occasional one time service charges.
On the other hand, there are several advantages to hiring a registered agent.
• The first advantage is that a commercial registered agent allows you to protect your privacy. The registered agent has to file his or her address with the Florida State Division of Corporations. That address is searchable in the state database and is a matter of public record. If you are the registered agent for your own LLC, your address on file with the state. If you hire a commercial registered agent, your personal address is protected.
• A second advantage is that hiring a commercial agent is convenience. If you work, family, or travel ever takes you out of your office at the address under which you registered your LLC, then there is the chance that you will not be available to receive service of process notices. That puts you and your business at risk. If you hire a commercial registered agent, then you are free to do your business both in and out of the office without worrying if there is someone present to receive legal documents.
• Hiring a company to act as your registered agent allows you to be discreet about your business. If you are by chance sued, it would be much better for the lawsuit paperwork to be served to a third party company offsite than for it to be served at your place of business in the presence of your employees and clients.
• A registered agent company also comes with the benefit of experience. A registered agent company will know the laws, know state deadlines for filing paperwork, and will help you to comply with all laws.
• Finally, a registered agent service will make it easier for you to expand your business beyond state borders if you choose to do so.
LLC Formations offers registered agent services that can help you to find the right registered agent for your business type.
3. Florida LLC Filing: Articles of Organization
Once you have a name and a registered agent, it is time to fill out and file your Florida Articles of Organization. The Florida statutes governing the articles of organization may be found on the Florida State Legislature’s Online Sunshine page. Updated processing times for all types of LLC applications are available on the Divisions of Corporations site.
You will need to have the following information on hand when you complete your articles of organization:
• your Limited Liability Company name,
• the street address of your LLC’s principal office,
• the LLC’s mailing address (if different from the principal office address),
• the name and address of your registered agent,
• the signature of your registered agent,
• a statement of purpose for your LLC (optional but recommended unless applying for a professional LLC),
• the names and street addresses of the manager and all authorized representatives,
• the effective date for the LLC (up to five days before or 90 days after the receipt of application),
• the signature of at least one authorized representative,
• a valid email address,
• method of payment for $125 filing fee,
• and a decision about whether you want to order a certificate of status ($5) and/or a certified copy ($30).
You may choose one of a variety of methods to complete this application.
If you would like to file your articles of organization online, visit the Division of Corporations page for the correct forms and instructions. This option for filing is most convenient and the only way that you may pay for your filing fees using a credit card. Filings will be processed by the Florida Department of State in the order that they are received. Once your articles of organization have been approved by the Division of corporations, you will receive your confirmation letter via email at the address that you provided on your application. Save this confirmation as you will not receive a paper copy via mail.
If you prefer to file your articles of organization by mail, visit the Division of Corporations Start a Business page for the pdf version of correct forms and instructions. Complete the forms and mail them to the following address:
New Filing Section
Division of Corporations
PO Box 6327
Tallahassee, FL 32314
Payment for filing by mail must either be made by check or money order made payable to the “Department of State.” Filings will be processed by the Florida Department of State in the order that they are received. Once your articles of organization have been approved by the Division of corporations, you will receive your confirmation letter via mail at the address that you provided on your application.
If you prefer to file your articles of organization in person, visit the Division of Corporations Start a Business page for the pdf version of correct forms and instructions. Complete the forms and take them to the following address:
New Filing Section
2661 Executive Center Circle
Tallahassee, FL 32301
Payment for filing in person must either be made by check or money order made payable to the “Department of State.” Filings will be processed by the Florida Department of State the same day. You will receive your confirmation in person. Arriving before 4:30 p.m. to file your articles of organization should ensure that you will receive confirmation in your hand on the same day as your filing.
For $30 you may obtain an optional certified copy, which will include a filed stamped copy of your Articles of Organization and will certify that the copy is an accurate representation of the document on file with the Department of State.
Certificate of Status
For $5 you may obtain an optional certificate of status which certifies that your LLC exists in the eyes of the Florida Department of State and that you have paid all of the required fees up through a certain date.
LLC Formations will help you to create and file your articles of organization, saving you the time and effort so that you can put that energy into the actual work of your business.
4. Creating Your Florida LLC Operating Agreement
After you have filed your articles of organization and have received confirmation that your LLC is a legal entity, it is time to create your operating agreement. While the operating agreement is not a legal document that you must file with the state, it is important that your LLC have one. A clear operating agreement will help you to keep your personal liability protection should you ever end up in court. It also shows that you are a serious business, which will help in your dealings with vendors and lenders.
The operating agreement is the foundation of your business operations; essentially it is your LLC’s constitution. The operation agreement should spell out the governance of the LLC for the lifespan of the company. The operating agreement should contain bylaws that delineate the financial and management rights and responsibilities of the LLC’s members. The Florida statutes governing the operating agreement for an LLC may be found on the Florida State Legislature’s Online Sunshine page.
An operating agreement should address the following areas:
1. It should address the percentage of the LLC that each member owns. Usually these percentages are determined by the amount of capital that each co-owner contributes at the start of the LLC. Ownership percentage is important in that it helps to determine who gets to make decisions for the LLC, so you should take time to think through this decision. Also, the document should clearly state time frames in which capital contributions are to be made and what penalties will ensue if those contributions are not made in a timely manner.
2. The document should clearly outline how profits and losses are to be split and distributed among the members. The percentage of profits to which each member is entitled and the percentage of losses for which they are responsible should be listed in the agreement. In addition, the document should clarify whether the profits will be distributed at regular intervals (e.g. quarterly or monthly) or withdrawn at any time at the request of individual members.
3. It should define the roles for each of the members and answer questions about management, decision making, and operation procedures. The document should make clear who will manage the LLC: a single manager, a group of managers, or all of the LLC members. It should also clarify who is ultimately responsible for making decisions for the LLC and what procedures the members will follow in order to reach those decisions. The clearer your company operating agreement is in regards to structure and procedures, the fewer disagreements and misunderstandings you are likely to have among members in the future.
4. The agreement should establish rules for voting. If the LLC is going to elect or appoint officers, a clear procedure for said election should be set. The document should clarify who gets to vote on major decisions about things such as adding new members or selling the business. You will need to make decisions about how much each member’s vote is worth. For example will you count each member’s vote equally or will each member’s vote count in relation to their percentage stake in the LLC. Also, you should decide what will constitute a winning vote. Will decisions have to be unanimous? Will you use a simple majority or require a supermajority? Finally, you should decide how you will document key votes and decisions for clarity in the future operations of the LLC.
5. It should stipulate how your LLC will handle accounting and what fiscal year you will use. The document should specify who will do the accounting: a member or a hired accountant. It should address the frequency and format of accounting documents that the accountant will share with members. Keeping every member informed about the financial status of the LLC will help to ensure the company’s financial health.
6. Your agreement should specify procedures in the event of either a member’s withdrawal from the LLC or the transfer of an LLC share from one member to another current or future member. If a co-owner decides to leave the business, you need to have procedures in place for the other co-owners to purchase his/her LLC unit or for an outside entity to buy into the LLC. It is important at this point to also make clear who is allowed to purchase a co-owner’s share of the LLC and who is not.
7. Finally, your operating agreement should lay out the steps for the dissolution of the LLC. In an ideal world your LLC will outlive you and will be passed on at your retirement via the transfer of share procedures that you outlined above. However, if it becomes necessary, prudent, or desirable to dissolve the LLC before that time, it is important that you have processes in place for how to dissolve the LLC. Planning for the end will prevent you from having to follow the rules set out by the Florida Department of State and will allow you to close the company on your own terms. At a minimum, the three procedures that you should include in this section of your agreement is who will vote to dissolve the LLC, how will they vote, and how will you split the capital that is left after the company has dissolved.
LLC Formations has the expertise to help you craft your operating agreement so that the language is clear and legally sound. Whether your LLC lasts beyond your lifetime and is part of your estate or whether you decide to sell your member unit and retire, you will have the confidence from the beginning that the correct procedures are in place.
5. Getting You Federal Tax ID Number
Once your LLC is registered with the state, you will need to get a Federal Tax ID Number, also known as an Employer Identification Number (EIN), Federal Employer Number, Federal Tax Number, Tax ID Number, or Federal Employer Identification Number (FEIN). You will need to obtain this number from the IRS, and it is required if your LLC will have any employees.
A Federal Tax ID Number is your LLC’s version of a social security number. It is used primarily for tax purposes, but most banks will require you to have one when you open a business account. Also, when you apply for certain licenses and permits, the agencies to which you apply may require a Federal Tax ID.
You have several options when applying for your Federal Tax ID Number:
You may apply using the IRS website, which is the recommended method of obtaining your number. Monday through Friday, from 7 a.m. to 10 p.m., online applications will be processed immediately, and they are free. An important side note for online applicants, your application cannot be processed online if the responsible party already has an EIN obtained via the internet. If this is the case, you need to use one of the other application methods.
Via FAX or Mail
You may apply by filling out the SS-4 form and either faxing or mailing the completed form. Whether you are faxing your application or mailing it, you can find the appropriate fax number on the “Where to File Your Taxes” (for Form SS-4) site.
Forms must contain all requested information and responsible entities must be eligible for a new EIN. If your application meets these criteria, you will receive your EIN. Faxed forms should be processed within four days, and you should receive your EIN via a fax to the fax number that you listed on your application. If you mail your completed form, the processing time is four weeks.
If you are not a United States citizen, you may apply for you Federal Tax ID Number by calling 267-941-1099 between 6 a.m. and 11 p.m. Eastern Standard Time. Approval vial this method may take up to six weeks.
LLC Formations will gladly complete this application for you.
6. Filing the LLC Florida Annual Report
Florida requires that an LLC file an annual report in order to remain in good standing and to avoid an administrative dissolution and shut down by the Florida Department of State. An LLC that misses the deadline can also incur fines and penalties. The Florida statute regulating the filing of annual reports is available on the Online Sunshine site.
The annual report must meet the following criteria:
• contain the name of the Florida LLC,
• contain the street address of the LLC’s office and its mailing address,
• contain the date of the LLC’s organization,
• contain the LLC’s Federal Employer ID Number or a statement that the LLC has applied for an EIN,
• contain the name, title, and address of at least one of the managers of the LLC,
• contain current information as of the date the report is delivered to the Florida Department of State,
• be delivered between January 1 and May 1 of the year following the year in which the LLC’s articles of organization were accepted,
• and be delivered between January 1 and May 1 of every subsequent year of the LLC’s existence.
You must submit your annual report online to the Florida Department of State using their Annual Report-SunBiz page. After you have submitted your annual report, you will get a success message. If you want to see a copy of your report, you will need to go to the Sunbiz page and do a Florida LLC search. Find the name of your LLC, click on it, scroll to the bottom, and look at the “Document Images.”
LLC Formations offers help writing annual reports and assistance in filing them.
7. Obtaining Licenses and Permits for Your LLC
Once your LLC is registered and has a Federal Tax ID Number, you will need to get the appropriate licenses and permits for your business to operate legally in the state. Since Florida does not have a statewide general business license, you will need to obtain the specific federal, state, and local licenses that pertain to your type of business. For example, businesses that sell alcohol require federal, state, and in some cases local permits to do so. Also, many municipalities require separate retail, restaurant, day care, manufacturing, or repair licenses.
You can do the research to find what licenses your LLC requires by visiting the Florida Department of Business & Professional Regulation website and the Florida Association of Counties website to see what businesses are required to be licensed in the state and what specific counties/municipalities require.
If you are struggling to navigate the licensing requirements in a particular county or municipality or for a particular type of business, you could hire a company that specializes in business license research. While this option will cost you money, hiring a capable firm will save you time and will ensure that you get the most current information and legal advice about licensing your business.
LLC Formations‘ business formation specialists will help you to comply with all federal, state, and local licensing requirements for your particular LLC business type.
8. Understanding Florida State Taxes RE Your LLC
In terms of federal taxes, a Florida LLCs is taxed either as a Sole Proprietorship (for LLCs with only one member) or as a Partnership (LLCs with multiple members). LLCs are pass-through or disregarded entities, so they do not have to file federal taxes as an LLC and are therefore not subject to double taxation like corporations are. The profits or losses from your LLC will be reported on the individual tax returns of the members.
As a state, Florida has no personal state income tax. Depending on the type of business that your LLC does, you may have to pay certain state and local business taxes, however. You should check with the Florida Department of Revenue to see what types of taxes (corporate, sales, withholding, communications services, etc.) your particular business is required to pay.
Failure to file and or pay taxes appropriately can have adverse effects on your LLC. You may want to consider working with an accountant after you have formed your LLC to ensure that you are abiding by all tax laws and filing paperwork correctly.
You can find more information about how the state of Florida taxes LLCs on the Florida Department of Revenue website. You can also view the statute governing LLC taxation (Section 443.036(20)) on the Online Sunshine site.
These tax laws can be confusing, but LLC Formations can help you to weed through the legalese and comply.
9. Opening Your Florida LLC Bank Account
It is important to the financial health and well-being of your new LLC that you set up a bank account for the company that is separate from the accounts of all of its members. Not only will this make the accounting for your LLC easier, it will also prevent misunderstandings and will protect all members’ personal assets in the event of debt collection or lawsuit.
You will need to set up a bank / checking account in your LLC’s name so that you can ensure that you have sufficient funds to properly operate your business. You should shop around for banks. Some banks in Florida will charge a maintenance fee for your LLC’s account, but others have no such fees. Calling four to six banks before you choose one will allow you to not only save money but also to find out exactly what your bank of choice requires in order to set up an account. LLC Formations can recommend banks in your area.
The bank will most likely ask for your Articles of Organization, your EIN, and two forms of identification for anyone who will have signing authority. They may want to see any resolutions or purpose statements for you LLC as well. You will need to decide who has signing authority for the account and how many signatures will be required for the withdrawal of large sums of money. You many also choose to have debit cards issued to each designated signer.
If your members will be doing a lot of traveling for business you may want to look into getting a credit card with a rewards point system in your LLC’s name. This will allow you to accrue airline miles, cash back, or other rewards as you do business.
10. Setting up Your LLC Phone Number
Just like you want to keep your members’ funds separate from the LLC’s funds, you should probably keep a separate phone number for the LLC. You can purchase a virtual business number that will forward calls directly to your cell phone but will help to keep your members’ personal phone numbers off of public record websites. This will not only help to ensure your privacy, it will also help the credibility of your business if none of the members are confusing private calls with business calls. Most services will allow you to choose from local numbers or 1-800 numbers.
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Some other things that you might want to research and consider as you form your LLC include the following:
- Are you going to seek out investors? If you are, you might want to consider whether you want to form an LLC or a corporation. Some types of investors prefer corporations. You should look at the types of investors that you want to attract before making this decision. You should also make sure that you clarify and document both the risks to investors and their rights (voting rights, distribution rights, tax benefits, etc.). You may want to make this part of your Operating Agreement. If you are considering soliciting investors, a good article to read comes from Richard Harroch at AllBusiness.com.
- Do you have good legal representation? From filing articles of organization to filing taxes, there will be a lot of paperwork and legal documentation to read, understand, and process. You may want to retain a company or attorney that specializes in helping LLCs form and run.
- Is it worthwhile to form a Foreign LLC in Florida? All of the benefits that registering an LLC in Florida bestows on residents also apply to Foreign LLCs. There is additional paperwork and additional fees may apply. You will likely need to hire a registered agent in the state of Florida. You will also likely need to provide a Certificate of Good Standing.
Starting an LLC in Florida can offer many benefits to you and the members of your company. Careful thought and planning are the secrets to success in any business venture, and LLC Formations can help do your research for you. After all this LLC is a big investment of your time and money, so consider trusting it to the experts. Check out our Georgia guide to starting LLCs.