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Opening an LLC in Florida is a popular choice for entrepreneurs due to the state’s business-friendly climate and low taxes. Forming an LLC, or limited liability company, provides business owners with personal liability protection and the ability to separate their assets from their business assets.
There are various steps involved in the LLC formation process, including registering with the Florida Department of State, obtaining necessary licenses and permits, and filing the necessary paperwork. There are many options out there, but this guide will cover how to start LLC in Florida.
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Pros on Starting LLC in Florida
Limited Liability Protection
As a small business owner you’ll enjoy limited liability protection when you form an LLC. If your business faces legal action or incurs debt, your assets, such as your home or savings, are protected.
This ensures that your assets are not at risk if the business fails. This benefit is particularly attractive to small business owners who want to protect their assets from business liabilities.
Tax Benefits
LLCs have a pass-through taxation structure, which means that profits and losses are reported on your tax return rather than the business being taxed separately. This can result in lower taxes and simplified tax filings. LLCs in Florida can choose their tax classification as an S corporation or a C corporation based on the business owner’s goals and objectives..
One way to structure your business is as an S corporation, which is not subject to corporate-level taxation. On the other hand, C corporations are also an option for businesses looking to reinvest earnings and avoid double taxation. This added flexibility can be a significant advantage for small businesses.
Flexibility
LLCs in Florida have flexible management structures, allowing owners to customize their operating agreements to suit their needs. This includes determining the members’ and managers’ roles and responsibilities and how profits and losses will be distributed. This flexibility allows business owners to create a structure that best suits their business goals and needs.
Cons of Starting an LLC in Florida
Additional Paperwork
Forming an LLC requires more paperwork and ongoing maintenance than other business structures. In Florida, LLCs must file annual reports and maintain separate business accounts. This additional paperwork can be time-consuming and expensive, a significant disadvantage for small businesses.
Difficulty Obtaining Loans
Banks might be hesitant to offer loans to LLCs than other business structures. This is because LLCs are considered riskier due to their relatively new legal status and the fact that they are often small and privately owned. As a result, lenders may require personal guarantees from the LLC’s members or managers or that the LLC obtain a personal loan instead of a business loan.
Issues Raising Capital
Unlike corporations, LLCs cannot issue shares of stock to raise funds. This limitation can make it harder for an LLC to attract investors and secure financing. Some investors may need to be more aware of LLCs’ relatively new legal status and the risks associated with small, privately owned businesses.
Moreover, while LLCs can bring in new members, doing so can be more complex than selling stock in a corporation. As a result, LLCs may need help to obtain the necessary capital to start or expand their operations.
7 Steps on How to Start LLC in Florida
1. Choose a Name for your LLC
Before finalizing your LLC name, ensure you choose a name not used by other businesses. This will help prevent any legal issues and ensure that your L.L.C. has a distinct identity in the marketplace.
To find out if the name you chose is available, go to the Florida Division of Corporations website and check the name. If the name is already in use, you must choose a different name for your L.L.C. If you intend to have a website, you should also check if the name you chose is available for your website so that your business name and the website name will correspond.
Ensure that the name you choose includes one of the following:
- Limited Liability Company
- Ltd. Co.
- L.L.C.
- L.C.
- Limited Company
2. Hire a Registered Agent
The second step on how to open LLC in Florida is to hire a Registered Agent. A Registered Agent can receive legal papers and official mail for your LLC. This person must be based in Florida and available during business hours to ensure that all important documents are received on time.
Even though you can choose to be your Registered Agent, hiring a professional service is usually better to avoid any mistakes or missed mail that could cause problems for your business later on. A good Registered Agent can also provide other services to help your LLC run more smoothly, such as reminders for important deadlines or assistance with filing paperwork.
3. Submit the Articles of Organization to the Florida Division of Corporations
The Articles of Organization is an official document that confirms your LLC as a legal entity in Florida. You must provide your LLC name and address, other names and addresses of LLC members, and the address of your appointed agent to file an Articles of Organization.
You can file Articles of Organization online, by mail, or in person. The online filing fee for the Articles of Organization is $125. Once your Articles of Organization are approved, you’ll receive a certificate of organization, proof that your LLC exists and is recognized by the state of Florida.
4. Obtain an Employer Identification Number (EIN)
Every business is given a unique EIN nine-digit number for tax purposes. You will need to get an EIN if you want to open a business bank account, pay taxes and hire employees. There are several ways to apply for an EIN they include, mail, fax, or phone. To apply for an EIN online, visit the IRS website and fill the form.
The process is free and typically takes only a few minutes. If you prefer to apply by mail, fax, or phone, complete Form SS-4 and provide the necessary information. The IRS will then assign an EIN and notify you by mail. Obtaining an EIN as soon as possible after forming your LLC is important so you can avoid any delays in opening a business bank account or hiring employees.
5. Create an Operating Agreement
An operating agreement document outlines the internal workings of your LLC, including ownership structure and management roles. It’s not legally required in Florida, but having one can help you avoid disputes with other members and provide a clear understanding of the company’s operations.
The operating agreement can also demonstrate to banks, lenders, and other interested parties that your LLC is a legitimate business entity with a clear plan for success. When drafting your operating agreement, consider consulting with an attorney to ensure it complies with state laws and accurately reflects your LLC’s unique structure and goals or you can use a free online template operating agreement to do this.
6. Open a Business Bank Account
Opening a business bank account enables you to keep your other finances away from your business finances. When opening a business bank account, you must provide your EIN and Articles of Organization.
Also, you may need to obtain any necessary insurance policies, such as liability insurance, to protect your business from potential risks. Insurance policies can help you minimize financial losses and protect your assets. Ultimately when choosing a business bank, ensure to look for one that best suits your needs.
7. File Your LLC Franchise Tax
Once you have formed your LLC in Florida, you must file an annual LLC Franchise Tax and Public Information Report with the Florida Department of State. This report must be filed annually by May 1st to maintain your LLC’s active status. The report includes information about your Limited liability company, such as your LLC name, appointed agent, and the names and addresses of its members or managers. It also requires you to pay an annual franchise tax.
Filing this report is essential because failure to do so can result in penalties and even the revocation of your LLC’s status. You can file the report online or by mail, and it’s a good idea to mark the deadline on your calendar so that you remember. Also, you must keep your LLC’s information up-to-date with the Florida Department of State, as failure to do so can also result in penalties.
Cost To Set Up LLC in Florida
The cost to set up an LLC in Florida includes a $125 filing fee for the Articles of Organization, which is the main document required to form the LLC. Also, if you hire a registered agent, there may be an additional cost for their services. Obtaining an EIN from the IRS is free, but some third-party companies may charge a fee to assist with the application process. Finally, there may be ongoing fees to maintain the LLC, such as an annual report fee and taxes.
FAQs On Starting LLC In Florida
Conclusion
Starting an LLC in Florida is a relatively simple process. The key steps include choosing a name, hiring a registered agent, filing the Articles of Organization, obtaining an EIN, creating an operating agreement, opening a business bank account, obtaining any necessary insurance policies, and filing an LLC Franchise Tax and Public Information Report.
While some costs are associated with setting up an LLC, the benefits of limited liability protection and potential tax advantages make it a worthwhile investment for many business owners. As always, it is essential to consult with legal and financial professionals for guidance and advice on how to start an LLC in Florida.
