How to Start a Business in Florida

Florida is widely considered to be one of the best states for small business owners and entrepreneurs. Officially forming your business is the best way to take advantage of Florida's business-friendly climate, lack of a personal income tax, and large consumer base.

Follow this guide for the nine steps you'll need to get your Florida business legally formed and operating, from choosing the best business structure for your operations to understanding the associated tax obligations.

Benefits of Starting a Business in Florida

Officially launching a business in Florida benefits several types of entities. C corporations benefit from a lack of corporate franchise taxes on capital stock, while LLCs and other pass-through entities enjoy no personal income tax. Beyond lower taxes, Florida offers a growing economy, a thriving population, and numerous job-creating opportunities.

Corporate franchise tax. In Florida, there's:

• No corporate franchise tax on capital stock

• No corporate income tax on a limited partnership and subchapter S corporations

Property tax. Businesses don't pay property tax on:

• Inventories

• Goods in transit for up to 180 days

Sales and use tax. There are exemptions from Florida's sales and use tax, including:

• No sales and use tax on goods manufactured or produced in Florida (for export outside of the state) and on cogeneration of electricity

• No sales tax on purchases of raw materials incorporated in a final product for resale, including non-reusable containers or packaging

State-level taxation. Florida offers tax benefits at the state level, including:

• No property tax assessed

• No personal income tax

What Are The Steps to Start a Small Business In Florida?

Follow these nine steps to officially form your business in Florida, from choosing a business idea to opening a dedicated business bank account.

1. Choose a Business Idea

The first step in starting a new business in Florida is to choose a business idea. Some of the top industries in the state include tourism, healthcare, professional services, real estate, and technology. If you're uncertain, draft a business plan to guide you as you develop your small business.

You can choose from two business plans: a lean plan and a traditional plan. While both plans can provide insight, there are differences to know about before proceeding.

• A lean plan is more of a summary. It's useful when you’re planning to establish the most important details of your small business.

• A traditional plan will be more comprehensive. You’ll use this plan to provide details when seeking financing from lenders.

Whichever you use, you’ll write as many details about your small business as you think you’ll need to move forward.

2. Choose a Business Name

Next, you’ll choose a business name. Your business name can be your legal name, or it can be a name you’ll do business as (or a fictitious name). This name must differ from your:

• Entity’s legal name.

• Personal name if you are doing business as a sole proprietor

Once selected, you’ll need to advertise your business name at least once in a newspaper in the county where your business is located. Proof of publication isn’t required, so the state relies on an honor system for this step.

3. Choose a Business Entity

You’ll then choose a structure, including the following business entities in Florida:

• Sole proprietorship

• Limited liability company (LLC)

• S corporation (also known as an S corp)

• C corporation (also known as a C corp)

• Partnership

You can also open your business entity as a general partnership or as a limited partnership.

4. Register Your Business

Once you've selected your entity, it's time to register your business. You should have obtained an employer identification number (EIN) by this step of the process. An EIN lets you hire employees and is also required for filing taxes and opening a business bank account. If you'll operate your business as an LLC, you'll also need a registered agent. You can act as your own registered agent or use a registered agent service. You’ll register your new business with the city or county where it will be based. To complete this step, you’ll also register with the Florida Department of State.

If you plan to do business under a name different from your legal name, you must also register a Florida DBA.

5. Understand the Tax Implications

There are several taxes and rules by entity type that you should be aware of as you start your business in Florida.

Sole proprietors must pay their federal taxes according to their individual income tax rate. Florida lacks a state-level personal income tax.

Florida LLCs are recognized as either disregarded entities or as partnerships whose owners do not pay state taxes on pass-through income. Whether your Florida LLC is a disregarded entity or a partnership, the LLC doesn’t pay state income taxes, but a Florida LLC can incorporate. If that happens, the LLC will have to pay the minimum rate (3.3%) or the full 5.5%.

S corps, functioning as pass-through entities, pass gains and losses to each shareholder for reporting on their personal income tax returns. While there's no personal income tax in Florida, owners must address their federal tax obligations.

At the corporate level, C corps will pay either 5.5% of their federal taxable income (minus any credits or tax exemptions) or the minimum tax rate of 3.3%. Florida allows C corps to subtract up to $50,000 as the standard exemption from their adjusted federal taxable income before applying the state rate.

Partnerships, including general partnerships, limited partnerships, and limited liability partnerships, don’t have a state income tax requirement in Florida. Instead, these businesses and their partners will pay federal income tax at their personal income tax bracket.

Florida reemployment tax — called unemployment taxes in other states — is the responsibility of employers in the state. This fund is for eligible unemployed workers, and employees are never required to contribute.

6. Acquire the Necessary License and Permits

Florida has two main licensing agencies for small businesses:

• The Department of Agriculture and Consumer Services (DACS) for agricultural operations and food-release businesses.

• The Department of Business and Professional Regulation (DBPR) for contractors, real estate agents, healthcare providers, and cosmetologists.

You may need to contact the city or county where your small business will operate to obtain the appropriate permits for your new entity.

7. Insurance

Florida has several insurance requirements that small business owners should be aware of. The exact insurance you’ll provide as an employer and the rules you'll follow will depend on your industry.

• All employers in the state of Florida must provide workers’ compensation insurance to their employees.

• The construction industry must have coverage once the first employee is hired, while other industries (retail and restaurants) must have coverage once four or more employees are hired.

• Commercial auto insurance is also a requirement for business-owned vehicles.

There are several optional small business policies to evaluate, including:

• Business Owner’s Policy

• Commercial Property Insurance

• Employment Practices Liability Insurance

• Professional Liability

• Product Liability

8. Reporting Requirements

Florida has annual reporting fees that you'll be responsible for. These fees are based on the business entity you selected.

9. Business Bank Account

If you are starting a small business in Florida, it is important to open a dedicated business bank account. This account will keep personal and business finances separate, making it more efficient to track income and expenses.

To open a business bank account in Florida, you must have your business's legal documentation and identification on hand. This includes your:

• Articles of Incorporation or Articles of Organization

• Florida business license

• EIN

When choosing a bank, it is essential to research options to find one that fits your needs and offers low fees for business accounts.

Florida-Specific Considerations for New Business Owners

Keep these considerations in mind before starting a business in Florida.

First, Florida is very spread out, with prominent cities in the panhandle and the peninsula. Miami is a global capital of international finance and trade; Tampa is popular for health and financial services firms; Orlando is a popular tourist destination; and Jacksonville is renowned for its insurance and banking sectors. Maximize your competitive advantages by choosing a city or region that aligns best with your industry.

Second, the population is significant when considering where to open your small business in Florida. The northern region of the state isn’t as populated as the state’s central and southern regions. Depending on the nature of your business, this may be a benefit or a disadvantage.

Third, your small business may qualify for corporate income tax incentives. In Florida, your small business can be eligible for incentives related to:

• Energy. The High Impact Performance Incentive (HIPI) offers grant funding to Florida businesses in designated clean energy sectors that make significant investments while creating full-time jobs.

• Insurers and Health Maintenance Organizations. Insurance Premium Tax Incentives allow insurers to claim a credit against premium taxes and fees equal to up to 15% of the salaries of eligible employees who reside in the state.

• Investment in Florida. The Capital Investment Tax Credit (CITC) grants Florida businesses a multi-year credit against their corporate income tax liability for qualified capital-intensive investments, available for up to 20 years.

• Jobs. The Rural Job Tax Credit Program offers credits ranging from $1,000 up to $1,500 per qualified employee for businesses operating in designated rural counties.

• Other Taxes Paid. Use the Qualified Target Industry Tax Refund (QTI) program to receive tax refunds on paid corporate income, sales, ad valorem, and insurance premium taxes when creating high-wage jobs in Florida.

Taking Your Next Step Toward Florida Business Formation

Establishing your Florida business the right way from launch, with the correct entity selection, proper registrations, and a clear picture of your tax obligations, saves significant time and cost down the road. While this guide gives you everything you need to establish your business in Florida, professional formation support is optimal.

Ensure your business is formed correctly from the start with year-round tax planning adjustments by exploring 1-800Accountant's tax and business formation services today.