Incorporation is a powerful tool that allows a business owner to protect himself from the liabilities of operating a company. These liabilities can come from various sources, including accidents and other incidents that result in bodily injury or property damage.
By incorporating your business, you have an opportunity to limit those liabilities to just the assets of the business, thus protecting your assets (home, car, etc.). It makes sense to incorporate for most companies because most limited liability companies are limited liability corporations (LLCs).
This means they are generally taxed like partnerships instead of corporations which naturally leads to lower taxes for these businesses. Here are some steps on how you can incorporate your business in the state of Florida.
How to Incorporate a Business in Florida
1. Select a Business Name
Before registering your fictitious business name, you need to make sure that it is not already available. You can check on the availability of a business name by visiting Florida’s Division of Corporation’s website at www.sunbiz.org.
You can also check for names that are not available through the state by visiting www.nameprotect.com. The Division of Corporation’s principal office has information on what you can and cannot name your business, so be sure to visit their website before selecting a name.
2. File the Articles of Incorporation for Florida
You can file the Articles of Incorporation on Florida’s Division of Corporation’s website at www.sunbiz.org. The filing fee for forming a corporation is $125 or $150 if you want expedited processing service from the state.
Florida Articles of Incorporation is a public record, and anyone can obtain a copy of the Articles. The information included in the articles is as follows:
- name of the corporation,
- agent for service of process,
- the mailing address of registered office, and
- if organized to render a service, then its purpose must be stated.
3. Obtain an Employer Identification Number (EIN)
If you are forming a Florida corporation or LLC, the Internal Revenue Service (IRS) will require an Employer Identification Number before issuing your tax number. You can apply for this by filing form SS4, and there is no cost to apply for this.
4. If Needed Obtain a State Tax ID Number
Some states may require you to register and file for state tax identification numbers before incorporating, including Florida. If so, then you should do that before applying for your federal employer identification number (EIN).
5. Pay the Costs and Fees to Incorporate in Florida
Once you have filed your articles of incorporation, you will need to file for a state tax identification number. This can be done by filing form FTB3520. Be sure to contact the Division of Corporations before paying any fees, as there may be other forms you need to point to become incorporated.
Pros and cons of incorporating
Incorporating offers several pros and cons when it comes to protecting the owner from liabilities. In addition, there are other advantages and disadvantages of an LLC or a Corporation in general which you should consider before deciding what is appropriate for your business. Here are some Pros and Cons of Incorporating
- The primary advantage in Florida is that it protects your assets from being used in a lawsuit for claims arising from the company’s activities. However, for this protection to be adequate, a formal process must be followed. This includes ensuring all corporate formalities are observed, such as holding meetings, recording minutes of said meetings, keeping good accounting records, and so forth.
- Suppose you want to raise capital by having investors. In that case, incorporating is a good option as investors are typically more comfortable investing in a company instead of an individual due to limited liability.
- If you want your business to be treated as a separate business entity from yourself, then a corporation and limited liability company might be good options for you. This means that the business will have its assets and liabilities, which will not affect anything else should it go out of business, and this can help to ensure creditors that they will likely get repaid.
- The corporation requires compliance with formalities such as having shareholder meetings and keeping detailed minutes and records of those meetings. Failure to do so may result in the corporation forfeiting essential protections such as limited liability.
- Formation requires additional fees such as state taxes and fees
- The corporation is subject to double taxation, where income is taxed at the corporate level and again when the money is distributed to shareholders as dividends
How much does it cost to incorporate in Florida?
The costs will vary depending on the company type, but some forms and fees must be filed each year. The filing fee is $125 or $150 if you want expedited processing service from the state. For a list of additional fees, please visit http://sunbiz.org/credit/CorporationFees.asp#additional.
Florida Department of State Division of Corporations website provides information about establishing a business in Florida and incorporating, registering a name for your corporation or LLC, obtaining an EIN for your business, filing annual reports, and paying online using their e-filing system.
In addition to all of these services, both new businesses and existing businesses can find help with other issues, such as checking on the status of a business name or finding out what forms and fees need to be filed.
How long does it take to start a corporation in Florida?
It will likely take at least a couple of weeks after filing your articles of incorporation and paying the fees for filing online with the Division of Corporations.
However, some businesses may need additional filings and information before applying for an EIN, which is required for some businesses like banks and insurance companies.
There are several types of corporations that you can incorporate in Florida.
A standard C-corporation is a for-profit corporation whose shareholders receive no tax benefits from income or losses.
It may also be called Class 1 stock and has one tier of taxation, which means the corporation itself does not pay taxes, but the corporate income or loss passes through to shareholders who must report it on their tax returns.
The S-corporation is similar to the C-corporation, but its purpose is different. It is considered more like a partnership than a corporation because the business appears on the shareholder’s tax returns rather than separate books and records.
An LLC (limited liability company) will provide limited liability, but in some cases, taxation can be even more complicated.
Certificate of Incorporation in Florida
A certificate of incorporation is a kind of public records filed with the state which verifies that you have met all requirements for incorporating as an official corporation.
It describes the purpose and legality of your corporation and contains information about any incorporators, Initial corporate meetings, registered office locations, and required contact information including registered agent names and addresses.
Once you have filed what’s called “articles of incorporation” then you will receive a Certificate of Incorporation showing that your company has been established as a legal entity.
This legal document must be kept on file at the location where your business conducts affairs such as your boardroom/meeting room or reception area so that it is accessible to interested parties such as investors or potential customers who may wish to speak with officers or initial directors of the company.
What is a registered agent?
A registered agent in Florida is someone who has agreed to accept official legal documents on behalf of your business when they are delivered by mail or by personal delivery such as certified or overnight mail since these types of services require a signature from someone at the location where the legal papers are left.
Even if your professional corporation conducts its business entirely via phone, fax, and email you will be required to maintain a physical address for service through the U.S. Postal Service and this must be listed as your corporate headquarters (not a P.O. Box) where all-important letters and notices can be received safely and legally without interruption throughout the year.
Using a Florida Incorporation Service
You may find it extremely beneficial to use a Florida incorporation service that provides registered agent services and filing assistance for your corporation.
A competent business lawyer or accountant can point you towards such firms which can not only save time and money but make the entire process of incorporating as painless as possible whether you are an experienced entrepreneur or someone who has never started a company before.
Employer Identification Number and Federal Taxes
Once your corporation has been established in Florida you will need to obtain an Employer Identification Number (EIN) from the Internal Revenue Service. This is a nine-digit number that you must supply on all official paperwork related to your business, including your annual tax returns.
What are Annual Reports?
Florida requires corporations to file an annual report every year with the Division of Corporations by June 1st. Failure to do so may result in penalties or suspension of corporate status which can lead to serious legal complications if it isn’t sorted out quickly.
A registered agent at a reputable incorporation service can answer any questions about filing requirements and assist with the preparation of this report if necessary.
Florida Business Registration
All Florida corporations are required to register with the state of Florida at least 30 days prior to doing business in the state. This includes any corporation which plans to sell products or services in Florida, rent property, hire employees or maintain bank accounts there.
Note: Annual Report Fees are non-refundable even if your annual report is rejected for filing due to an incorrect registered agent address on file therefore please take great care when entering this information!
Permits and Licenses
In addition to paying your annual report fee, Florida imposes additional requirements when it comes to owning a corporation in the state. Corporations with a presence in Florida must pay an additional tax on each officer and director who resides or works within this state in addition to the annual franchise fee which is due for every corporation registered in Florida.
Alcohol beverage permits are required by even non-alcohol-related businesses such as grocery stores that sell assorted items including beer and winemaking obtaining these permits a time-consuming process that can be made easier by using an incorporation service that specializes in alcohol permitting procedures.
Should I open a corporate bank account?
Although not required by Florida law, many entrepreneurs choose to open a corporate bank account at the time of incorporation in Florida.
This can help you keep your business and personal finances completely separate which is often advisable since even the best-managed business entities fail from time to time leaving creditors and other important parties without payment for financial transactions or services rendered.
There are many reputable businesses that can assist with incorporating your business in Florida and make it an easy process regardless of the kind of company you wish to form or whether it is your first time forming a corporation. A quick web search should yield multiple results for these services which will vastly simplify what could be a complicated task.
Business laws are subject to change with or without notification from state agencies so always check with the proper authorities if you have any doubts about your ability to form a corporation or meet other legal requirements listed above. Do not rely on this article as legal advice.