Florida is known as the Sunshine State – it is located on a peninsula in the southeastern part of the United States. The Caribbean climate attracts a great number of Americans and the population density is high in Florida. In addition to wonderful weather conditions, Florida offers many opportunities for business people who register companies in the state.
You can enjoy tax benefits and other advantages if you set up an LLC in Florida. The state ranks high for the ease of doing business. Below we discuss the requirements that you will have to meet if you decide to register an LLC in Florida, the main benefits that this will bring, and some disadvantages associated with having a company registered in Florida.
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The first thing to do is to give your prospective company a nice name. The company name has to be in English (or at least it has to be written in Latin letters) and it has to end in ‘Limited Liability Company’, ‘Ltd.’, ‘Со’, ‘LLC’, or ‘L.L.C’. There is no need to reserve the company name but it should be different from names of other companies registered in Florida. There is a website where you can find the names of all companies in the state.
Who can register an LLC in Florida?
At least one person is required to register a company in Florida. The maximum number of company founders is not limited and the company founders’ residence plays no role: they can be residents of the USA or any other country.
A company Charter is a mandatory document for LLC registration in Florida. The Charter shall contains the following information about the company founders/ members/ managers:
- Names and addresses of the company founders;
- Name and signature of the registration agent;
- Names, addresses, and signatures of the company managers;
- Date of company formation.
You can submit the company Charter to the Registrar by email or through an online application. Please note that a state duty of US$ 125 needs to be paid.
An LLC registered in Florida does not have to have an operational agreement. However, if the company has several founders/ members, drawing up an operational agreement would be a very good idea. The agreement will specify the rights and obligations of the company members and help resolve possible disputes in the future. It will also serve as the basic document that governs the company’s business operations.
You cannot set up an LLC in Florida without hiring a registration agent. Physical and legal persons can act as registration agents in Florida. The important requirement is that they should be residents of the state (or registered in the state if it is a corporate entity). The registration agent will help you prepare all the application documents in a neat way and then apply for company registration on your behalf.
Employer Identification Number
If your LLC has more than one founder/ member, you have to acquire an Employer Identification Number (EIN) from the IRS. Your company will use this number when paying taxes. If the company is founded by a single person but this person plans to hire personnel, an EIN is also going to be required.
Timeframe of LLC registration in Florida
Normally, it takes around 14 business days to establish a company in Florida. The timeframe can be larger if some extraordinary circumstances occur.
A bank account for your LLC in Florida
Your LLC in Florida will need a bank account in the USA if you are planning to perform business operations in the country or outside. The company Director has to pay a personal visit to the bank to apply for banking services. Foreigners opening corporate bank accounts in the USA should certainly seek legal advice: setting up corporate bank accounts for non-resident customers has always been a challenge.
Taxes and financial reports in Florida
If you perform business operations in the United States and derive profits from American sources, then you become an American taxpayer. However, if you are not a tax resident of the USA and if the money comes to your American bank account from China or Germany, for example, you are not taxable in the USA.
Financial reports are to be filed every year in the period between January 1 and May 1. Every LLC needs to file annual reports if it wants to keep going.
The report processing fee is US$ 138.75 and if you fail to file the report on time, the fine is US$ 400. If you do business in the United States, you will certainly need to hire an accountant or an accounting form.
Advantages of registering an LLC in Florida
- Pass-through taxation. Pass-through taxation is applied to LLCs in Florida. This means that the income made through the LLC by the company owners is declared in their personal tax returns. This taxation system allows avoiding paying taxes twice. Unlike LLCs, Corporations registered in the United States cannot avoid double taxation. First, they have to pay taxes on the corporate income and then the corporation shareholders have to pay taxes on their personal income when dividends are paid to them. The opportunity to save on taxes is probably one of the most important advantages of a Florida-based LLC.
- Organizational flexibility. The number of LLC founders is not limited in Florida. The company owners are free to distribute the profits and share the obligations in any way that they choose. They can manage the company themselves or hire company managers.
- Few formalities. An LLC registered in Florida does not have to issue any resolutions or corporate decisions, which simplifies the management process. It also does not have to hold annual meetings but putting the key business decisions on paper is recommendable anyway. A written document will help you keep organized and give you clear guidance.
- Subsidiary companies. An LLC registered in Florida can have subsidiaries in Florida or in other jurisdictions. No restrictions apply.
Disadvantages of registering an LLC in Florida
No jurisdiction is perfect for doing business and some disadvantages are associated with having an LLC registered in Florida. They are not as weighty as the advantages are but they exist anyway. You should bear the following in mind when establishing an LLC in Florida:
- An LLC in Florida is a rather costly business instrument. A sole proprietorship or a partnership would entail fewer expenses even though your liability is going to be unlimited if you choose any of these forms of company ownership.
- Difficulties associated with property rights transfer. Shares of a corporation can be bought and sold, which makes property rights transfer a simple matter. Things become more complicated if it’s an LLC owned by several people. The operational agreement has to specify if transferring property rights is possible. If so, it also has to be clear if other company owners have to give their consent in case one of the owners wants to sell, give up, or hand down his/ her property rights. This is one of the main reasons why an operational agreement needs to be drawn up even though it is not required by law in Florida.
To conclude, registering an LLC in Florida you can acquire a powerful business instrument. If you perform business operations outside the United States, you will also have to pay nothing in taxes in the country. In any case, however, company formation in the USA is a complicated process and some professional assistance is required.