For small business owners in the state of Florida, navigating fiscal decisions is just as important as delivering exceptional products and services to their customers. Amidst the excitement of bringing a business idea to life, one crucial question takes center stage right from the start: Should you incorporate your business in Florida?

Why incorporate in Florida?

Incorporating a business as a “corporation” grants it financial independence from its owners or operators. The corporation assumes legal liability for relevant local, state, and federal taxes and can be subject to lawsuits from individuals, other companies, or corporations. 

However, the business owner is not personally liable for business debts, providing a crucial layer of protection for their personal assets. Additionally, an established corporation has the freedom to enter into contracts and agreements.

Once formed, a corporation operates as a distinct business entity, capable of surviving changes in ownership. Unlike sole proprietorships, each corporation is owned by its “shareholders,” not a specific individual. Active shareholders have the privilege to vote on the composition of the “Board of Directors,” who carry the responsibility for future financial decisions, internal regulations, and corporate policy changes.

Another legal structuring option is the Limited Liability Company (LLC), allowing business owners to operate their enterprise independently of personal finances. As “members” of the business, LLC owners can enjoy many of the advantages similar to sole proprietorships or partnerships while still benefiting from the protection of incorporation.

Advantages of incorporating in Florida

• Anonymity: While corporations can provide a level of anonymity, the officers and directors of the corporation may still be publicly listed. This can vary depending on the specific jurisdiction and the type of corporation (e.g., C Corporation, S Corporation, LLC). So, complete anonymity may not always be achievable, but a corporation does offer more privacy than a sole proprietorship or partnership.
• Tax advantages: Florida offers a business-friendly tax environment, making it an attractive choice for incorporation. Florida does not have a state income tax, which can lead to significant savings for both the corporation and its shareholders. The ‘pass-through’ taxation benefits businesses, potentially reducing their overall tax burden.
  
  Pass-through taxation typically refers to S Corporations and LLCs, where profits are taxed at the individual level, not the corporate level. C Corporations are subject to double taxation, where profits are taxed at the corporate level and then again at the individual level when distributed as dividends. 
• Longevity: A corporation’s survival does not rely on a single person and can continue to operate through ownership changes, financial difficulties, or the death of a shareholder. An unincorporated business may suffer if the owner or a partner faces personal issues. 
  
  As a corporation, a small business can sell stock to stay financially stable during tough times. The corporation’s survival doesn’t rely on a single person; it’s run by shareholders and a Board of Directors.
• Access to capital: Florida’s business-friendly environment, including incentives and limited liability protection, makes the Sunshine State attractive for investors and lenders. Additionally, Florida offers great incentives for business growth, such as: 

Target industry incentive 

Target Industry Incentive offers an incentive known as Qualified Target Industry (QTI) Tax Refund in Florida. The program encourages quality job growth in targeted high-value-added businesses. Under this program, the refund is limited to 25% of the approved total per fiscal year, and qualified businesses can receive up to $1.5 million in tax refunds per fiscal year. 

Approved applicant receives tax refunds on various taxes paid:

• Corporate income tax
• Sales tax
• Ad valorem tax
• Intangible personal property tax
• Insurance premium tax
• Communications services tax
• Certain other taxes

Incumbent worker training program

The program provides grant-funded support for ongoing education and training of current employees in established Florida businesses. This effort involves offering reimbursement grants to businesses that address pre-approved training expenses. Currently, qualifying companies can receive reimbursements at rates of 50 percent or 75 percent, depending on the situation.

Quick response training

The program fosters specialized training for high-skill industries, benefiting 950+ businesses in Florida. It aims to enhance productivity and profits through skilled hires. Tailored for new and expanding Florida enterprises, the program allocates resources for personalized training of new full-time staff.

• Flexibility: Florida provides flexibility in choosing the most suitable corporate structure for your business needs. Each type of corporation has its own tax implications and benefits, allowing entrepreneurs to tailor their incorporation to suit their specific objectives.
• Limited liability protection: When a company is incorporated, it becomes a separate legal entity, and its shareholders’ personal assets are generally shielded from business debts and liabilities. This means that in the event of lawsuits or financial difficulties faced by the corporation, the shareholder’s personal assets are not at risk.
• Clear ownership structure: In a corporation, ownership is represented through shares, providing a transparent ownership structure. Shareholders have specific rights and responsibilities, and decisions are often made through voting processes. This clarity in ownership helps in avoiding disputes and streamlining decision-making processes.

Disadvantages of a Florida business incorporation 

• Double taxation for C corporations: A C corporation has a corporate income tax of 5.5% in Florida. These corporations encounter a notable disadvantage in the form of double taxation. This means that the corporation’s profits are taxed at the corporate level and then again when distributed as dividends to shareholders. This can result in higher overall tax liabilities compared to other business structures.
• Initial and ongoing costs: The process of incorporating a business in Florida involves various fees and expenses, including filing fees, legal fees, and ongoing compliance costs. The base fee for incorporating in Florida is $70, but the actual costs of incorporation depend on the type of business and your location. These financial burdens can be substantial for small businesses or startups, impacting their initial capital and cash flow.
• Formality requirements: Corporations are subject to more formalities than other business structures. The administrative requirements for holding regular meetings, maintaining minutes, and adhering to other corporate formalities can be time-consuming and cumbersome, especially for small business owners with limited resources.
• Increased regulatory oversight: Corporations often face greater regulatory scrutiny than other business structures. Compliance with state and federal regulations can be complex and demanding, necessitating meticulous record-keeping and reporting, which may be challenging for some businesses to manage effectively.
• Personal liability risks for directors and officers: Although shareholders are shielded from personal liability for business debts, directors and officers of a corporation can still be held personally liable for their actions or decisions under certain circumstances, such as involvement in fraudulent activities and breach of fiduciary duty. This liability risk may deter qualified individuals from serving in these roles.
• Corporate governance challenges: In larger corporations, decision-making processes can be slower due to multiple layers of management and governance structures. This can lead to delays in responding to market changes or implementing critical business decisions.

What forms do I need to file to incorporate online in Florida?

Corporations in Florida must file Florida Form F 1120, better known as the “Corporate Income/Franchise Tax Return.” This is also true of Florida corporations located in other states. In the case of partnerships where a corporation is one of the partners, the partnership must file a “Florida Partnership Information Return” or Florida Form F 1065.

If you’re ready to incorporate in Florida, MaxFilings is ready with all the information and guidance you need — including whether or not it’s beneficial for you to incorporate your business online in the Sunshine State.

Get started today, or contact us if you have any questions.

FAQs

Who is Sunbiz LLC, and what does it do in Florida? 

Sunbiz LLC is an online directory managed by the Florida Department of State’s Division of Corporations. Sunbiz is responsible for maintaining official records and filings related to businesses and corporations operating in Florida. It provides online services for business registration, filing documents, and searching business records. It’s a crucial resource for anyone looking to establish or manage a business in Florida.

Is it necessary to register my business in Florida? 

Yes, if you plan to conduct business in Florida, you need to register your business with the state. This includes entities such as corporations, limited liability companies (LLCs), partnerships, and sole proprietorships that operate under a name other than the owner’s legal name. Registering your business ensures legal compliance, allows you to obtain necessary licenses and permits, and provides legitimacy and protection for your business operations.

Which county in Florida has the highest number of businesses?

Bay County, Florida, particularly Panama City, has the highest number of businesses, with 13,000 small businesses per 100,000 people. 

How can I perform a business name search in Florida?

To conduct a business name search in Florida, go to the Florida Division of Corporations’ database and search by name for your chosen corporation. You can also use the online search tool provided by Sunbiz. 

Here’s how:

• Visit the Sunbiz website (sunbiz.org).
• Navigate to the “Search Records” section.
• Choose the “Search for a Business” option.
• Enter the business name you want to search for.
• Review the search results to find information about existing businesses with similar names.

What is needed to do business in Florida?

To do business in Florida, whether as an individual or a company, you need to follow several steps to ensure legal compliance and set up your business for success:

• Choose a business structure
• Select a business name
• Register your business with the Florida Division of Corporations (Sunbiz)
• Obtain an Employer Identification Number (EIN) from the IRS
• Obtain necessary licenses and permits
• Register for state taxes (Sales and use tax)
• Open a business bank account
• Comply with employment laws
• Secure business insurance
• Understand zoning and location regulations
• File annual reports (if required)
• Stay informed about legal changes

Is Florida a good state for business?

Florida is the second best state to open a business in, ranking behind Texas.

According to the 2022 Small Business Profile report conducted by the US Small Business Administration, the state of Florida is home to an impressive small business sector:

1. With 3.0 million small businesses, they make up 99.8% of all businesses in Florida.
2. These businesses employ 3.6 million individuals, accounting for 40.5% of the total workforce in the Sunshine State.