by Sheren Javdan
October 14, 2014
Florida has a lot more than sunshine and blue waters to offer new businesses. More appealing than the weather is the tax benefits Florida offers its residents. Business owners interested in avoiding paying high tax rates can gain a lot by operating their business in Florida.
Here are some important things to consider before starting a business in Florida:
Choose & Register A Business Name
One of the most important steps in starting your new business is choosing a business name. Your business name remains with your company for the rest of its life. It serves as both a brand indicator and reputation builder for your company.
Therefore, it is really important to confirm your business name’s domain name is available and can be registered with the United States Patent & Trademark Office (USPTO).
Remember that forming a legal entity does not in itself authorize the exclusive use of a business name. Forming a corporation or LLC only prevents others from forming the same type of entity, with the same name, in the same state. Therefore, it is important to obtain a trademark to guarantee protection.
Choose & Form Legal Entity
The 3 most common Florida legal entities are C corporations, S corporations and LLCs.
To decide which business entity is best for your business, do some research and consult a specialist such as an attorney or accountant.
SEE ALSO: 4 Benefits of Corporations And LLCs
Remember that any legal entity you choose must be filed with the Florida Department of State and follow specific procedures and file certain forms. In addition to filing the required documents, business owners must pay a fee. The Florida Department of State will then issue a certificate that the filing has been accepted.
Individuals who choose to run their business as a sole proprietorship do not need register with the Department of State. They will have to use their individual name as a business name unless they register a fictitious name with the Florida Division of Corporations.
Florida’s greatest tax benefit is that there is no personal income, state income, capital gains or death taxes in Florida. Which means, individuals doing business as sole proprietors will not be required to pay income tax on their income.
However, corporations that do business and earn income in Florida must file a corporate income tax return (Form F-1120) every year. The amount due is calculated using federal federal taxable income that is modified by certain Florida adjustments. The rate is 5.5% and the first $5,000 of net income is exempt.
Corporations that elect to be treated as S corporations can avoid double taxation. The business can pass through allocated income to its shareholders and avoid paying income taxes at a federal corporate level. Because Florida does not impose personal income taxes on individuals, there is no pass through of income to the individual shareholders.
Obtain Professional Licenses & Permits
A Florida business may be required to acquire certain permits or licenses to operate their businesses. The exact permit or license and the cost of each depends on the business’ geographical location and the nature of the services.
Those businesses that are required to obtain a license before doing business can be subject to fines or be forced to close their business.
For a complete list of licensing requirements visit the State of Florida official portal.
Open a Business Bank Account
It’s important to keep business funds separate from personal funds. Commingling of funds can cause you major liability and tax issues. Start things off on the right foot from day one and keep your business finances organized. Be sure to contact a local banker regarding the requirements associated with a business account.
In addition to receiving liability protection by forming a corporation or LLC, Florida business owners should look into obtaining insurance for their businesses. Whether or not you or your business do something wrong, a lawsuit can always become a reality. Having an insurance policy will leave your insurance company responsible for handling lawsuits and allow you to focus on running your business.