Start a Florida S Corp

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Start Your S Corporation in Florida

Start an S Corp in Florida

Do you want to start a Florida S corp? If so and you don’t know the process, we can help. The following guide will tell you more about how to create an S corporation in Florida and the potential tax benefits.

For a limited liability company (LLC), filing as an S corp could provide savings on self-employment taxes for the owners. For C corporations, S corporations can be a way to avoid double taxation. For more information about S corporations in general, see our “What Is an S Corporation?” page. 

What is an S corp?

An S corp isn’t a separate legal business entity or business structure. Instead, it’s a tax classification that either an LLC or a corporation can apply for with the Internal Revenue Service (IRS) if it meets all the criteria. We’ll outline those criteria and the steps you would need to take to file as an S corp if you decide that it’s right for your business.

If you want to form an LLC with S corp tax status, our S corp service can help you do just that. We also offer more services to help you run and grow your business and stay in compliance with the state.

Florida S Corp Filing Requirements

S corporations have some filing requirements and limitations you should be aware of before you begin this process. Specifically, to qualify for S corporation status, an entity must:

  • Be a domestic corporation or LLC
  • Not be an ineligible corporation, such as certain financial institutions, insurance companies, and domestic international sales corporations
  • Have only one class of stock
  • Have no more than 100 shareholders or members (“shareholders” is the term for owners of a corporation, while “members” is the term for owners of an LLC)
  • Have only allowable shareholders or members, which includes individuals, certain trusts, and estates. The shareholders may not be partnerships, corporations, or non-resident aliens. A nonresident alien is an alien who has not passed the green card test or the substantial presence test.

If your business entity meets these requirements, read on to learn how to apply for an S corp election. 

Filing as an S Corp in Florida

To create a Florida S corporation, you’ll need to create either an LLC or a C corporation if you haven’t already done so. Then, you’ll file an election form with the IRS.

If you’re ready to learn about filing as an S corporation in Florida, we’ll walk you through it. First, we’ll show you how to form an LLC in Florida. If you’d rather form a corporation, follow the instructions on our Florida corporation page.

Afterward, in Step 6, we’ll explain how to file for S corp tax status as either an LLC or corporation. We’ll also discuss specific considerations for S corporations in Florida.

1. Choose a name

The first step toward forming a Florida LLC is selecting a name. You’ll need to consider marketing by making it something memorable that conveys what you’re selling, but you’ll also need to abide by Florida’s business naming regulations. Otherwise, your filing could be rejected by the state.

By law, your name must be distinguishable from all other business names in Florida. To see if your desired name is available, do a Florida Business Entity Search on the Florida Department of State, Division of Corporations website.

If you find that your name is available, follow up by calling or emailing the Division of Corporations to make sure, as search engines like this aren’t completely foolproof. Also, check online to make sure that no one has claimed a state or federal trademark on your name, as the state doesn’t check for those.

Other LLC Name Requirements

Here are a few other naming requirements for Florida LLCs:

  • Designator: Your LLC’s name must include the designator “Limited Liability Company” or one of its abbreviations (LLC or L.L.C.).
  • Not Connected to the Government: Your LLC Florida name can’t contain language that implies your limited liability company is connected with the state or federal government.
  • Stated Purpose: Your name can’t imply or openly state that it’s organized for a purpose that it’s not authorized to. 

Reserving a Business Name 

Do you have your perfect name but aren’t ready to register? The state of Florida allows you to reserve a business name for up to 120 days. Use our Business Name Reservation service, and we can do the hard work for you. We also perform a search to make sure your name is available.

2. Choose a registered agent

Appoint a registered agent. Selecting a registered agent is an important part of registering your LLC in Florida. Registered agents are required by Florida law for every business recognized by the state.

What are Florida registered agents?

If you’re not familiar with registered agents, here’s a quick breakdown of what they are:

  • A Florida registered agent is a person or business designated to legal notices as well as official paperwork and other items from the state of Florida.
  • They are required to be at the address provided during work hours to receive (and then pass on) important documents to you as the business owner. For example, if your company is sued for any reason, the registered agent is served the papers.
  • Registered agents aren’t lawyers and don’t provide legal advice or feedback on the information they receive.

Who can serve as your registered agent? 

Since every Florida LLC is required to have a registered agent, you can’t skip this step. Legally, you can serve as your own registered agent, appoint another person, or use a registered agent service.

Although you’re allowed to be your registered agent, there are some compelling reasons to use a registered agent service instead:

  • You don’t want to be served with a lawsuit in front of customers.
  • Being your own agent makes it difficult to go meet clients, take a vacation, or have a sick day, since the registered agent needs to be at the address provided during all normal business hours.
  • It takes one responsibility off your shoulders, so you can focus on building your dream business.

Either way, all registered agents in Florida need to be over the age of 18 and have a physical street address in the state. (P.O. boxes aren’t acceptable.)

Our registered agent service can provide you with a reliable agent for your business, whether it’s an LLC or a corporation.

3. File Florida Articles of Organization

File your Articles of Organization with the state of Florida. This step makes your LLC in Florida an official business in the eyes of the state.

Filing Your Florida Articles of Organization 

To file your Articles of Organization, submit the information online with the Florida Department of State, Division of Corporations. When you file your information online, you’ll pay the LLC filing fee with your credit card and complete everything online. An email confirmation will be sent to the email you provide.

What to Include in Your Florida LLC Articles of Organization

Submitting your Articles of Organization is one of the most important steps in forming your LLC. Be sure to have the following information when submitting your information:

  • Your LLC name
  • Principal business address
  • Registered agent name and address
  • LLC purpose
  • Authorized managers or representatives: Here you’ll provide the person’s name who is authorized to execute and file records with the Florida Division of Corporations.
  • Effective date: Your effective date will be the date the Division of Corporations receives and files your Articles unless you specify an alternative date when you file. The effective date can be up to 5 days before the date of filing and up to 90 days after you file.
  • Signature: It’s required that you or someone acting as the authorized representative signs the document. This person is called the LLC Organizer.

Want to know more about your Florida Articles of Organization? View our step-by-step guide on how to file your Florida Articles of Organization.

Remember that we can handle this paperwork for you with our business formation services.

4. Create an operating agreement

Creating an LLC operating agreement is the next step. Even though having an operating agreement in Florida isn’t required by law, it’s a critical document for an LLC. An LLC operating agreement usually covers the rules your company will follow, lists LLC owners, each member’s ownership percentage, and much more. 

The operating agreement also discusses how finances will be handled and how decisions will be made (including management and member voting structure). It’s essentially the agreed-upon rules for your LLC for you and the other members. Once signed by all members, it’s legally binding.

5. Apply for an EIN

Get an Employer Identification Number (EIN) from the IRS. Many LLCs, including those with employees or more than one owner, are legally required to obtain an EIN, also known as a Federal Tax Identification Number or Federal Employer ID Number. Most banks require an LLC to have an EIN to open a business bank account. This nine-digit number is used for tax purposes and other financial paperwork.

We can obtain this number for you with our EIN service.

6. File form to apply for S corp election

Submit the form to apply for S corp tax status. Once your LLC or C corporation formation is approved by the state, you need to file Form 2553, Election by a Small Business Corporation, with the IRS to get S corp status. 

The IRS requires that you complete and file your Form 2553: 

  • Within 75 days of the formation of your LLC or C corporation, or no more than 75 days after the beginning of the tax year in which the election is to take effect

OR

  • At any time during the tax year preceding the tax year the election is to take effect.

There’s one caveat for limited liability companies wanting to file as an S corp: If your LLC is past the 75-day election deadline, you’ll also need to file Form 8832, Entity Classification Election, to elect to be taxed as a corporation. Then you would file both Form 8832 and Form 2553 together via USPS-certified mail. 

All of the shareholders/members must sign the consent statement portion of the form. For more information on when and how to file Form 2553, visit the IRS website.

S Corp Florida: Pros and Cons

While S corp classification does come with a number of benefits for some businesses, making this election might not be right for every company. Carefully weigh the various pros and cons before deciding how you want to move forward. Consult an experienced tax professional about whether an S corp would be best for your business.

Advantages of S Corp Status for LLCs

The advantages of filing as an S corporation for an LLC aren’t exactly the same as they are for C corporations. First, let’s look at the advantages for LLCs.

A traditional LLC already has pass-through taxation by default, so the benefits of S corp election for an LLC have to do with the taxes for self-employment. This does take some explanation, but it could save certain LLCs a lot in taxes.

Explaining Self-Employment Taxes

The members of a standard LLC are considered self-employed. They’re paid by receiving their share of profits from the LLC, but they can’t be employed by the LLC, meaning that they’re self-employed. Being self-employed means paying taxes for self-employment (Social Security and Medicare, which add up to about 15.3%) on all profits they receive from the LLC. This is more than the taxes they’d pay when working for someone else because their employer would pay part of them.

Dividing Salary and Profits

But when the members elect S corp tax status, they can be compensated in two ways, by receiving their share of the profits and by being paid as an employee. Once they do that, they only pay Social Security and Medicare taxes on their salary and not the profits they receive. Depending on factors such as how profitable your company is, the savings could add up to a lot. (Of course, the members will still pay income and all other applicable taxes on their share of the profits.) Money paid out as salary is a tax-deductible expense for the business. 

Reasonable Compensation

One stipulation to this is that the IRS expects you to pay yourself a “reasonable salary” as an employee of the LLC. If they didn’t, you could pay yourself an annual salary of $3 and avoid contributing anything to Social Security and Medicare. 

So, how is “reasonable compensation” defined by the IRS? The instructions on Form 1120-S read, “Distributions and other payments by an S corporation to a corporate officer must be treated as wages to the extent the amounts are reasonable compensation for services rendered to the corporation.” While the terms aren’t completely defined, the IRS seems to consider “reasonable” to be something similar to what others in your field are earning.

If the IRS determines that the salary you’re paying yourself isn’t reasonable, it has the authority to reclassify your non-wage distributions (which aren’t subject to employment taxes) to wages (which are subject to employment taxes). Various court cases have supported the IRS’s right to do this.

Disadvantages of S Corp Status for LLCs

Having an LLC with S corp status can have some drawbacks over a regular LLC:

Stricter Requirements 

As we listed above, S corps have more qualifications than a standard LLC or corporation. An S corp can have no more than 100 members, and none of them can be partnerships, corporations, or non-resident aliens. A standard LLC doesn’t have these limitations.

More Scrutiny from the IRS

Because of the above restrictions and the requirements about paying yourself a “reasonable salary,” the IRS tends to monitor LLCs filing as S corps more closely. That could mean a greater chance of being audited, even if you follow the law to the letter. In fact, small business owners in an S corp may want to observe some of the same formalities that C corporations do (such as extensive record keeping), even if they’re not legally required to.

More Accounting and Bookkeeping

Having an LLC with an S corporation election generally means more paperwork. If you don’t already have to do payroll for your business, being an owner-employee means that you’ll have to do so. Your taxes will be more complex, as well.

With these added complications, you’re likely to have higher administrative costs. You might need an accountant, bookkeeper, and/or a payroll service or software.

Advantages of S Corp Status for C Corporations

If you have a C corporation (the default form of corporation), filing as an S corp has these advantages:

Pass-Through Taxation

One major disadvantage for traditional corporations is “double taxation.” When the corporation makes money, the IRS taxes those profits on the corporate level. But when those profits are ‌distributed to the individual owners (shareholders) as dividends, they’re taxed a second time on the shareholders’ personal tax returns.

But when a C corporation qualifies to be an S corp, those profits are only taxed at the individual level. The business itself isn’t taxed on them. This is called “pass-through taxation,” and it’s how business entities like sole proprietorships and general partnerships are taxed. LLCs are also taxed this way unless they choose to be taxed as a corporation.

Limited Number of Shareholders

As mentioned, an S corporation can’t have more than 100 shareholders, while a C corporation has no such restriction. That limitation could be an issue later if the corporation expands and goes public.

Limited Types of Shareholders

All S corp shareholders must be U.S. citizens, or certain trusts or estates. That could limit your ability to expand internationally. You also can’t have partnerships or corporations as shareholders. C corporations don’t have these limitations.

Only One Class of Stock

One way corporations attract investors is to offer preferred stock. That’s okay for C corporations, but the IRS doesn’t allow it for S corporations.

More IRS Scrutiny

With the extra restrictions S corps have, the IRS watches them more closely to see if they’re in compliance. In other words, your corporation’s more likely to get audited.

We can’t stress enough how important it is to have tax guidance about your specific situation from a qualified tax professional. An accountant with S corp experience should be able to make sure you stay in compliance with the IRS, and they may also be able to help you find additional tax savings.

We need to add here that, since the 2017 Tax Cuts and Jobs Act, the corporate tax rate has been lowered to a flat 21%. Thus, the disadvantages of double taxation aren’t as severe now as they were. 

Writing Off Losses

Just as business profits pass through to the owners of an S corp, so do the losses. Unlike the shareholders of a C corporation, S corporation shareholders can write off the company’s losses on their personal income statements. 

This can help offset their income from other sources and can be helpful if the corporation loses money in the first couple of years of business. Still, make sure you’re aware of ​​the IRS’s shareholder loss limitations.

Qualified Business Income Deduction

Under the Tax Cuts and Jobs Act, some S corp owners may be able to deduct up to 20% of their qualified business income. This deduction isn’t available to C corporation shareholders.

Qualified business income (QBI) is basically your share of the company’s profits, or, as the IRS puts it, “QBI is the net amount of qualified items of income, gain, deduction and loss from any qualified trade or business, including income from partnerships, S corporations, sole proprietorships, and certain trusts.” The IRS website has a detailed explanation as to what is and is not included in QBI. There’s an income threshold that, if exceeded, may reduce your QBI (see the IRS website for details).  

Disadvantages of S Corp Status for C Corporations

S corporation status also has the following minuses:

Florida-Specific Considerations

In an S corporation, the business itself doesn’t usually pay federal income taxes. But what about Florida state income taxes?

Florida treats businesses that file as an S corp for federal purposes the same way when it comes to Florida state income tax. That is, the same pass-through taxation that applies to federal income taxes applies to state income taxes. The individual business owners will pay state income taxes on their share of the profits, but those profits won’t first be taxed at the business level. So, you shouldn’t need to worry about a separate Florida S corp tax rate. The only S corporations in Florida that would need to pay the state corporate income tax are those that pay federal income tax on Line 22c of Federal Form 1120S.

Some states require an S corporation to make a separate S corp election at the state level, but Florida doesn’t require that. If a company has a valid federal subchapter S corporation election, it will automatically be a Florida S corporation. 

How We Can Help

Forming a business with or without S corporation election can be complicated, but we’d like to make it as easy for you as possible.

When you’re ready to make your move, we can help you form a Florida LLC with an S corporation designation and provide you with valuable support from our team of business experts. Just click the button below to get started.

Disclaimer: The content on this page is for information 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.

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Florida S Corporation FAQs

  • For a corporation, one of the biggest advantages is being able to avoid double taxation. Usually, a C corporation’s profits are taxed at both the business and individual shareholder level, while an S corp’s profits are taxed only at the individual shareholder level. 

    For an LLC, when the members elect S corp status, they can be compensated in two ways, by receiving their share of the profits and by being paid as an employee of the LLC. Once they do that, they only pay employment taxes (Social Security and Medicare) on their salary and not the profits they receive. For some LLCs, this can add up to substantial tax savings.

  • The naming process for your Florida corporation or LLC has nothing to do with your S corp status. Whether you file to be taxed as an S corp or not, your business remains an LLC or a corporation and follows the same Florida business naming rules.

    Before formally registering a business name, you should first search the Florida business entity records to make sure that you don’t select one that’s already in use by another business. That aside, however, you can typically name your Florida S corporation what you want as long as you comply with applicable state naming regulations.

  • S corp election may not be right for all businesses. If you’re not sure whether to identify your LLC as an S corp or keep the default status, be sure to consult with an experienced business law attorney or accountant in your state.

  • Calculating taxes can be tough, but you can check out our S corp tax guide to learn more about navigating taxes for your Florida S corporation. A certified tax professional can give you more definitive information for your circumstances.

  • No. At the present time, our S corp service is only for applying for S corp status when you form your LLC with us. We do offer plenty of other services to support your established business, though.

  • According to the IRS’s website, you’ll be notified of whether or not your S corp election is accepted within 60 days of filing Form 2553.

  • If you’re a new LLC, you must apply for S corp status within 75 days of the formation of your LLC or no more than 75 days after the beginning of the tax year in which the election is to take effect. For an existing business, you would file at any time during the tax year preceding the tax year it is to take effect.

  • Unless your S corporation is liable for federal income tax, you shouldn’t have a Florida corporate income tax filing requirement. Still, consult your tax advisor to make sure everything is in order, as tax laws are subject to change (and complicated).

  • An LLC is a legal business entity, whereas an S corp is a tax filing status. You can read more on our LLC vs. S Corp page. For more on LLC vs S corp Florida, visit our LLC vs S Corp in Florida page.