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How To Start an LLC in Florida
By Talon Abernathy MONEY RESEARCH COLLECTIVE
How do I start an LLC? It’s a common question to ask at the outset of your entrepreneurial journey. If you’re serious about creating a business in Florida but aren’t sure how to go about setting up an LLC, this guide may help you through the process. We’ll go over how much it costs to form an LLC and what you’ll need to know before you begin. We’ll also cover critical information about taxation and business expenses.
- Should I start an LLC?
- How much is it to start an LLC?
- How to get an LLC
- How to create an LLC
What is an LLC?
While traditional corporations are owned by their stockholders, a limited liability corporation, or LLC, doesn’t issue stock but is owned directly by one or more people. Both of these types of corporations shield their owners from liability for debts incurred by the business.
The LLC is a relatively recent innovation. In 1982, Florida became the second state to recognize LLCs. Now, more than 100,000 LLCs are formed annually in Florida. The popularity of this business structure can be attributed to the significant legal protections afforded to business owners, its ease of setup, and favorable tax treatment.
Currently, every state in the union recognizes LLCs, although rules, regulations and fees vary considerably. Many small and medium-sized businesses favor LLCs for the personal liability protection offered. However, LLCs aren’t limited to small companies such as your neighborhood plumber or family law attorney. Many large companies — including Alphabet, the holding company for Google — are also structured as LLCs.
The benefits of starting an LLC in Florida
How much does it cost to start an LLC in Florida? Many would-be business owners put off filing their LLC application because they think it will cost more than they can afford. However, the total cost to start an LLC in Florida is only $125, and ongoing annual fees come out to $138.75.
In exchange for setting up an LLC, you receive important legal protections. So long as you abide by Florida state laws governing LLCs, your personal assets will receive protection from debts and other liabilities incurred by the LLC. Without the protection of an LLC, a lender could potentially go after your bank account, your house and even your car to satisfy your business’s debt.
While an LLC is treated as a distinct legal entity separate from its owner, in certain instances owners can be held responsible for business decisions. An LLC member may be legally held accountable for their actions if they:
- Pierce the corporate veil by commingling personal and business funds
- Commit fraud or engage in other illegal business activities
- Manage the LLC in a manner not consistent with the operating agreement
An LLC can provide powerful legal protections, but only if the business owner adheres to all applicable rules and regulations.
LLCs also utilize a pass-through tax structure that protects you from double taxation. Double taxation occurs when income is taxed first at the corporate level and then at the individual level. C-Corporations experience double taxation. However, LLCs function as pass-through entities. In other words, income passes through the LLC to the individual, where it’s taxed.
Forming an LLC grants you credibility and status among your client base. Some prospective clients will view sole proprietorships with suspicion. Since this business structure requires little forethought or planning, it may appear less professional. By contrast, the public widely recognizes LLCs as professional business structures.
Steps to starting a Florida LLC
Follow these simple steps to start your Florida LLC.
1. Choose the name for your LLC
Certain rules govern what you can name your LLC. Before you put together your formation documents, check that the name you selected meets the following requirements:
- You can’t share a name with another business. LLC names operate on a first-come-first-serve basis. Once a name has been claimed, no one else can use it while that LLC is in operation. Check the Florida Division of Corporations’ online search tool to ensure no one has claimed your business’s name already.
- Your business’s name must be distinct. If another business has claimed your desired name, you can’t simply create a minor variation on it. For example, if the business name “Palm Tree Towing LLC” is already in use, you couldn’t name your business “Palm Trees Towing LLC.”
- You must identify your business as an LLC. In Florida, LLCs must contain Limited Liability Company, L.L.C. or LLC somewhere in the name.
- Your LLC name cannot infringe on trademarks or imply your business conducts illegal activities. Florida prohibits business names that bear a strong similarity to government agencies like the FBI or that infringe on protected terms like “the Olympics.” You also cannot use a name that implies your business engages in illegal activities.
2. Define the business structure
Once you have your business name, you must select how your business will be structured. LLCs can be organized as single- or multi-member organizations. While the number of owners, or members, stands out as the most obvious difference between the two, other, more subtle distinctions should be taken into account before you choose how to structure your business.
Single-member LLC
As the name suggests, a single-member LLC has just one owner. The owner is also considered the manager of the company. Most sole proprietorships that incorporate choose to incorporate as a single-member LLC. Businesses with a single owner also typically choose the single-member LLC structure. However, in some cases, a business with multiple stakeholders or business partners may choose to incorporate as a single-member LLC, usually for tax reasons.
Multi-member LLC
A multi-member LLC has more than one member or owner. Multi-member LLCs commonly reflect a partnership or co-ownership structure. For example, if you start an LLC with a friend or business partner, you will probably want to file as a multi-member LLC.
However, individual company owners may still choose to make their company a multi-member LLC. For example, the owner of a company may choose to list their spouse as a member of their LLC even if the spouse is not involved in the day-to-day operations of the business. They might choose to do this so their spouse can execute important business decisions in case the owner is incapacitated.
3. Identify a registered agent
Your registered agent is empowered to accept important tax and legal documents for your business. Florida state law requires your LLC to name a registered agent, but you have quite a bit of flexibility when it comes to choosing your company’s registered agent. For example, a single-member LLC owner can act as the business’s registered agent.
Business owners can also appoint a manager, employee or other individual as their LLC’s registered agent. A registered agent must be accessible at the business’s listed physical address during normal business hours (i.e., 9 a.m. to 5 p.m. Monday through Friday).
You may also choose to hire a professional registered agent service. These services handle official correspondence on your behalf. Registered agent services provide business owners with a measure of privacy since members of the public can easily look up a registered agent’s address online. They also offer business owners greater flexibility by eliminating the need for them to be present at their listed address during normal business hours.
4. Fill out the Florida LLC articles of organization
An LLC’s articles of organization is a formation document listing a business’s:
- Name
- Principal office or street address
- Registered agent
- Managers and members
- Effective date
The principal office is the primary location from which your business operates. You may not use a PO box as your business’s principal office. The effective date is the date when your LLC is officially formed. Businesses can choose from any date between five days before the Department of State receives the filing to 90 days after the DOS receives the filing. However, most business owners select the same day the Florida DOS accepts their application as their effective date.
5. Acquire your business license
Now that you’ve set up your LLC, it’s time to get your business license(s). While Florida has no general state-level business license, many industries require businesses to acquire specific licenses to operate legally in Florida. Many counties and municipalities also require businesses to acquire a business tax receipt before they open. This document proves that all applicable city and/or county business taxes have been paid and serves as a kind of general business license.
You’ll need to set aside some time and collect a few important legal documents to accomplish this step. Before you begin, have the following information in front of you:
- EIN
- A description of your business activities
- Business name
- Effective date
- Total number of employees
- Projected annual sales
- Principal address
- Contact information
- Business sales tax number
- Any required professional certifications
The exact details of applying for specific state licenses vary by industry and occupation. For example, the application process for an architecture firm will look different than the same process for a dentist’s office. It’s important that you receive all applicable state and local business licenses before you begin operations. Failure to do so could result in a costly shutdown, fines, and even jail time.
What you should do after the LLC formation process
Now that you’ve formed your LLC, you have just a few more steps to take care of before you can finally focus on the day-to-day operations of your business.
Don’t forget about your Florida LLC operating agreement
Unlike some states, Florida law does not require business owners to create an operating agreement. However, most businesses will benefit from the clarity an operating agreement brings. Operating agreements clearly delineate core business processes such as which members have the authority to enter into legally binding contracts on behalf of the company and how profits and losses are distributed. Operating agreements also clearly spell out a company’s internal rules and regulations and the responsibilities of individual LLC members.
Secure your EIN
An Employer Identification Number functions like a Social Security number for your business. However, unlike an SSN, your EIN is not considered sensitive information. You may share your EIN freely without running the same risks for identity theft that you would by sharing your SSN.
You need an EIN to file taxes, pay employees and contractors and open accounts with banks and other financial institutions in your business’s name. It’s a relatively straightforward process to apply for an EIN. You can contact the IRS over the phone, online, through mail or via fax. The IRS will provide you with an EIN free of charge.
Set up other necessary business accounts
Now that you have an EIN, you can set up financial services accounts for your LLC. Most LLCs will need:
- A savings account
- A checking account
- A merchant services account
- A credit card account
Having an LLC and an EIN will make setting up these accounts a breeze. If you’re a single-member LLC, you may be tempted to use your personal accounts for your business. While this will save you some time in the short run, in the long run, it will put you at personal risk. Commingling personal and business funds can open you up to personal liability for your business’s actions.
Struggling to find the right bank for your LLC? Check out our guide to the best business checking accounts.
Do you have everything you need to get started?
Now that you know how to start an LLC business, it’s time to go back through and check that you have all the necessary documents and information to get started. If you haven’t already, pick out a name for your business and look online to make sure it’s not already in use.
Decide how you want your business to be structured. Then identify a registered agent. Fill out the Florida LLC articles of organization and apply for any applicable local and industry-specific licenses. Next, create an LLC operating agreement. Finally, secure an EIN and the necessary financial service accounts. After you’ve ticked off the last box on your LLC checklist, you’ll be all ready to begin operations on your brand-new business.
Talon Abernathy is a freelance writer, former teacher, and author. He has written on a broad variety of topics including SaaS for business, the legal industry, and personal finance and investing. He excels in simplifying complex topics while writing with an eye toward SEO and reader satisfaction.