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Corporations are a popular business entity because they are treated as independent legal entities, limiting the liabilities of the owners and managers and allowing the corporation to enter into contracts and maintain stability over time. Although these are the more popular corporation benefits, others can potentially make the model more appealing.
Corporations fall into the following three categories:
Are you ready to get your Florida corporation off the ground? Our detailed guide below can help paint a better picture of what to expect during the setup process.
To start a corporation in Florida, you must file Articles of Incorporation with the Florida Department of State. To simplify the process of forming a corporation in the state of Florida, check out the following 10 steps.
When it comes to naming your corporation, you need to make sure you comply with Florida business naming laws. There are many factors to consider during the process. These include making sure your business name is unique, suits your business well, aligns with all regulations, and includes a corporation designator.
Here are nine guidelines to help you through the naming process:
You also don’t want to overlook the importance of choosing a name for which you can reserve a matching website domain name that has not already been taken. When you reserve your name or register your business, you should also register the domain name you plan on using with it at the same time. Additionally, you should give consideration to any “doing business as” (DBA) names or trademarks you may want.
The board of directors for a corporation oversees the operations of the business. As such, your business needs one to get started.
The initial incorporators — those filing the Articles of Incorporation for the business — often appoint the initial board of directors. Afterward, the board is elected annually by shareholders (those who hold stock in the company — this can include the original incorporators). In Florida, the minimum number of directors on the board varies based on the type of corporation. Nonprofits and agricultural co-ops require a minimum of three, private schools require five, but in general, the minimum needed is one.
Incorporators may be directors and also shareholders. In fact, a single person can start a corporation and hold all associated titles. But the three titles are associated with different roles within the company. To clarify, here are some of the different roles that exist in a corporation:
It’s a good idea for all incorporators to meet and elect an initial board of directors before filing the Articles of Incorporation. This board can then begin creating the corporate bylaws (described in a later section).
A Florida registered agent is a person or entity that receives service of process on behalf of the corporation as well as important government correspondence. Service of process can include legal documents, such as court summons.
You are required to name a registered agent when you file your Articles of Incorporation. In Florida, a registered agent must meet the following criteria:
Now that all the details have been sorted out, you can file your Articles of Incorporation. This document officially registers and establishes your business with the state.
For your Articles of Incorporation, a few things to include should be:
This filing is completed online through the Sunbiz website or can be completed and submitted by mail. A filing fee of $70 is required with additional optional fees of $8.75 for a certified copy or certificate of status.
The creation of corporate bylaws by the board of directors should happen as soon as possible. The bylaws establish all of the rules and functions of the corporation. Florida requires all corporations to adopt bylaws.
Your corporate bylaws may include:
Since the bylaws are legally binding, it is a good idea to seek assistance when creating them. However, you can find templates online to get yourself started.
While you are not required to file your bylaws anywhere, you should keep them safe with any other corporate records. It’s often a good idea when starting to set up a corporate records book where you can keep all of your corporation’s important papers, including bylaws, minutes from meetings, and stock certificates.
Next on the list of things to tackle is the shareholder agreement. This is a document that outlines the rights and responsibilities of all shareholders.
Again, this agreement can be drafted from a template, but you may want to utilize professional assistance. Your shareholder agreement should be kept with your other important corporate records.
One of the requirements for starting a corporation is issuing stock. When you filed your Articles of Incorporation, you stated the number of stock shares that were authorized. The number of shares you issue should always be less than or equal to this number.
It’s a good idea to determine how much capital you need before issuing shares of stock so that you can determine a reasonable value for each share. Shares of stock may also be issued in exchange for services or other noncash value and capital contributions.
Each share is only issued once. However, after being issued, it can be traded and sold. All issued shares must be documented in the company’s annual report. Although it is not typically required, most corporations issue certificates to shareholders, indicating their shares.
Stock may be issued publicly or privately. Privately issued stock is usually issued to the founders, officers, employees, or a private group of investors. A public corporation makes a portion of its stock shares available for public purchase.
Companies that issue public stock need to file quarterly statements with the Securities and Exchange Commission (SEC). They must also track how many shares are issued and to whom. You should also check with the Florida Division of Securities for their record requirements.
Florida law requires businesses to obtain a local business tax receipt before engaging in any business in Florida. These are administered at the county level, so the cost will vary depending on your location and other factors.
Depending on your business type, you may need additional licenses. Visit the Florida Department of Business and Professional Regulation and see if your business requires additional state business licenses or permits. You’ll also need to research what federal, local, and industry-specific licensing your corporation needs.
If any of your business activities might impact the environment, visit the Florida Department of Environmental Protection to see what sort of permits may be required.
Corporations are generally regarded as distinct entities separate from the people involved in them. As such, you will need to acquire an Employer Identification Number (EIN). This number acts like the corporation’s Social Security number for tax purposes.
To apply for an EIN, you need to visit the IRS website and fill out the online form. It only takes a few minutes and is free. Afterward, you will receive your EIN. You should keep track of this number, as you will need it for future documentation and filing your business’s tax returns.
Remember that corporations must pay their own taxes separate from any taxes paid on shareholder earnings. This must be done at the federal and state levels by submitting the appropriate returns each year. You may also be responsible for sales tax, employee withholdings, and other local taxes.
Florida corporations are required to file an annual report each year. This report is a chance to update some of your business’s information. The following information will need to be included in the report:
The report can be submitted online and requires a $150 filing fee payable by credit, check, or money order.
The cost of starting a Florida corporation can vary considerably, depending on the size and type of business and location. At a minimum, you will need to pay the $70 fee for filing the Articles of Incorporation. Additional fees may include:
Our services can help alleviate any stress of getting your corporation off the ground by assisting with many of the required steps for a low annual fee.
Many benefits come with starting a corporation in Florida. As a business type, the benefits of a corporation include:
There are disadvantages you should be aware of, however. Among these are the tax structure (profits are taxed at both the corporation and personal income tax levels), and there is a lot more red tape and paperwork involved than other structures, such as LLCs.
C corporations are treated as separate entities and must file their own tax returns. In addition to this, all owners and shareholders file tax returns for earnings and dividends. This results in double taxation. While that might seem less than ideal, there are some benefits to this tax structure, including more flexibility in what can be deducted.
S corporations are pass-through entities. All profits are passed through to the owners, who must pay on their individual income taxes.
Nonprofit corporations can apply to be exempt from paying federal taxes, provided they stay within the rules for nonprofit activity. However, anyone drawing a salary from a nonprofit corporation will pay income tax on that salary.
Visit the Florida Department of Revenue website for more information about additional taxes your corporation may be responsible for, including sales and use tax.
Starting a corporation, or any type of business, is a great thing. We want to be there with you when you get started. Our services can help you during the formation process as well as grow and run your business. Get started today!
Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.