As the third most populous state, Florida has 2.5 million small businesses. In fact, 99.8% of all businesses in Florida are considered small businesses. A new business must decide with its business formation what type of business structure it will follow. Often a small business opts to become a limited liability company, also called an LLC. So, what steps are required of a business that seeks LLC formation?
Read on to learn more about Florida LLCs and the steps the state requires.
What Is a Limited Liability Company?
A limited liability company, or an LLC, is one type of business structure you can establish when starting a business in the US. Each state has its own specific requirements for LLCs.
For several reasons, an LLC business organization is a popular choice among many small businesses. An LLC protects its owners from personal responsibility for the liabilities and debts incurred by the business.
An LLC is considered a hybrid method that shares corporation, partnership, and sole proprietorship traits.
Let’s look at the steps it takes to LLC formation.
Steps for LLC Formation
Name Your LLC
One of the first requirements from the State of Florida is to select a name for your business. The state requires this name to be unique and not already registered with the Division of Corporations.
This rule is in place to avoid potential confusion between your business and existing ones. While your name must be original, it can’t have the names of banks, financial institutions, or any federal government agency as part of the LLC name.
Before naming your business, you can do a preliminary search, but you cannot reserve the name. If you plan on using a business website, it also makes sense to see if the URL is available with your business name.
Choose Your LLC Registered Agent
Another need in Florida LLC formation is to identify your LLC registered agent. The registered agent acts on behalf of the LLC and will:
- Accept legal and official mail
- Notify if the business is being sued
- Notify the business of a government notice
The person selected to be the registered agent for the LLC can be either a company or an individual. A business might select its business attorney as the registered agent.
A business can’t act as its own registered agent. However, a manager or member of the LLC can take on the role. The registered agent is required to be a Florida resident and have an official Florida address.
Prepare Articles of Organization
One of the most critical steps in LLC formation is to prepare its file articles of organization with the Division of Corporations. The state offers a PDF version of articles of organization you can fill in.
The information on the articles of organization establishes you as a business and makes operating an LLC in Florida official. The articles of organization include:
- LLC’s name and location of the business
- Name and address of registered agent (PO Boxes are not acceptable)
- Signature of registered agent
- LLC member names and addresses
- LLC manager’s name and address if the business is manager based
- Effective date of LLC
- Signature of the authorized person completing the form
The state also allows businesses to e-file this information to the Division of Corporations.
Create an Operating Agreement
While an operating agreement is not a requirement in Florida, it’s highly encouraged. This will help protect all LLC members when it drafts a written operating agreement that all parties agree to.
Most operating agreements include:
- Names and addresses of LLC members
- Purpose of the LLC
- Products and services provided by the LLC
- Expected contributions by each member to the LLC
- Ownership stake in the company, voting rights, and profit share of each member
- LLC meeting schedule and voting procedures
- Dissolution terms and procedures
This is an essential framework for the business and one where important long-term decisions get made. Because operating agreements are not one-size-fits-all, it makes sense to seek the help of an experienced business attorney to guide you through the process.
Apply for an Employee Identification Number
Many Florida LLCs must apply to the IRS for an employee identification number (EIN). The business needs an EIN if it has:
- Multiple owners
- Gets taxed as a corporation
The IRS uses the EIN to identify a business when they file their taxes or pay employee taxes.
If your business has employees, you must collect taxes and pay those to the IRS. You’ll collect and pay the IRS FICA and unemployment taxes. Your EIN is how the IRS connects what’s being paid to the employees.
Your business will also need workers’ compensation insurance and is required to report new hires to the Florida Department of Revenue within 20 days of being hired.
Florida also requires businesses to have an EIN if they plan to get a business loan or have a business credit card.
Get a Florida Business License
Several business types in Florida are required to have a business license. Several departments inside Florida’s government handle the different business licenses, depending on what the business does.
You can go to Florida’s Secretary of State’s website to determine if your business must register for a license.
Finances and Taxes
Most new businesses need some form of financing. You can seek a small business loan or private funding, including a business credit card. Most financial institutions will want to see your LLC formation paperwork before approving financing.
You’ll also need to make some important tax decisions as an LLC. You’ll need to notify the IRS how you want to pay taxes with your LLC.
An LLC can either get taxed as a pass-through entity or a corporation. There are some significant tax implications for each option. Your business should seek the help of a Florida business law attorney to make this decision.
Prepare an Annual Report
One huge advantage to starting a business in Florida is that the state doesn’t require payment of state taxes. So, an owner of an LLC won’t need to pay state taxes on the income they receive from the business.
However, the state requires that the LLC file an annual report to the Division of Corporations each year. This report allows the state to have updated information on the LLC. It is due between January 1 and May 1 each year, or late fees are charged.
LLC Formation with Knowledgeable Representation
Starting a business requires many important decisions, including its business entity model. While some steps exist for LLC formation in Florida, it also offers many advantages.
If you’re considering forming an LLC, you need a business lawyer to guide you through the process to ensure you don’t miss anything send us a message using our online contact form, or get in touch at (904)236-5317.