Establishing a company in Florida

Florida is one of the largest and most economically significant states in the United States, with a diverse business environment and a legal framework that supports a wide range of commercial activity. Florida law permits the formation of several types of business entities, among which the Limited Liability Company (LLC) and the Corporation (either C-Corporation or S-Corporation) are most commonly used. Each structure offers specific legal, tax, and operational attributes that are relevant to entrepreneurs, investors, and business owners depending on their strategic and organizational needs.

A Florida LLC is a hybrid legal structure that combines elements of both corporations and partnerships. It offers limited liability protection to its members, meaning that, in general, members are not personally liable for the debts or obligations of the LLC. The governance of a Florida LLC is typically set out in an internal operating agreement, which defines the rights and responsibilities of members and managers, as well as profit-sharing arrangements and management procedures. This agreement is not filed publicly, allowing a high degree of contractual freedom and internal flexibility.

Florida law allows for both single-member and multi-member LLCs. Members may be individuals or legal entities, and there are no residency or citizenship requirements. Management can be vested either in the members themselves (member-managed) or delegated to appointed managers (manager-managed). This structural flexibility permits the LLC to adapt to a variety of organizational models, from closely held businesses to more complex investment vehicles.

LLCs in Florida are treated as pass-through entities for federal income tax purposes by default. This means that profits and losses are passed through to the individual members, who report them on their personal tax returns. Alternatively, an LLC may elect to be taxed as a corporation. Florida imposes a state corporate income tax, currently at a rate of 5.5%, but this generally applies only to entities that elect corporate tax treatment.

Each Florida LLC must file an annual report with the Florida Department of State and pay an associated filing fee to maintain active status. Failure to file the annual report by the statutory deadline (May 1) may result in administrative dissolution.

A Florida Corporation is a separate legal entity formed under the Florida Business Corporation Act. Like LLCs, corporations provide limited liability protection to their shareholders. Corporations are required to adhere to a more formal governance structure, including the adoption of bylaws, issuance of shares, appointment of a board of directors, and the holding of annual meetings.

There is no minimum number of shareholders or directors required to form a Florida corporation, and the same individual may serve in multiple officer and director roles. Shareholders may be individuals or legal entities, and there are no state-imposed residency requirements.

Florida corporations may be formed as either C-Corporations or S-Corporations. A C-Corporation is subject to federal corporate income tax and, potentially, double taxation if corporate profits are distributed to shareholders as dividends. An S-Corporation, if it qualifies and makes the appropriate federal election, is taxed as a pass-through entity. S-Corporations, however, are subject to limitations such as a cap on the number of shareholders and restrictions on shareholder eligibility.

Corporations in Florida must also file an annual report with the Department of State to maintain good standing. Like LLCs, failure to file on time may result in administrative dissolution. Florida corporations are also subject to the state’s 5.5% corporate income tax unless they qualify for specific exemptions.

Both LLCs and corporations in Florida must maintain a registered agent and registered office located within the state. The registered agent is responsible for receiving legal service of process and official correspondence. Additionally, entities are required to maintain basic corporate records and books, which may be inspected by members, shareholders, or regulatory authorities under certain conditions.

Florida does not require disclosure of beneficial ownership information in formation documents. However, compliance with federal requirements, such as those under the Corporate Transparency Act (CTA), remains applicable. This may include the obligation to file beneficial ownership reports with the Financial Crimes Enforcement Network (FinCEN), depending on the nature and size of the entity.

Florida offers a legally robust and flexible framework for the formation and operation of LLCs and corporations. The choice between these entities involves careful consideration of management structure, liability protection, taxation, and regulatory obligations. While Florida does not impose excessive administrative burdens, entities are expected to comply with annual filing requirements, maintain statutory records, and ensure adherence to state and federal laws. Professional advice is recommended to determine the most appropriate structure based on the specific needs of the business and its stakeholders.