Start an S Corporation in Florida

Most small business owners want to pay as little in taxes as possible. Luckily, if you file as an S corporation in Florida, you might be able to reduce your company’s IRS tax liability. 

This guide will walk you through the steps for starting an S corp in Florida, the benefits this tax designation provides, and how it compares to other business entities, like an LLC.  

S Corporation in Florida: Key Points

• S corporations are not a formal business structure but an elected tax designation.

• S corporations benefit from personal asset protection, pass-through taxation, and lower self-employment tax.

• Forming an LLC or C corporation before electing S corp status through the IRS would be best.

What Is an S Corporation?

An S corporation is not a formal business entity. Instead, a limited liability company (LLC) or C corporation elects for the S tax classification under the IRS tax code. Eligible Florida companies that choose S corp status avoid double taxation and experience significant savings on self-employment tax.

Tax Considerations for an S Corporation in Florida

S corp status allows companies to reduce some of their taxes. Instead of experiencing double taxation from paying income taxes on individual and corporate tax returns, all income, losses, and deductions pass through to company shareholders. Each shareholder reports their share of business profits and losses only once on their personal income tax return. 

By eliminating double taxation, the S corporation tax treatment also lowers self-employment tax.

Florida Tax Treatment of S Corporations 

Suppose you file for S corp status in Florida. In that case, you gain the benefits of personal asset protection and tax savings, including reducing self-employment taxes.

Florida Franchise Tax for S Corporations

According to the Florida Department of Revenue, S corps that pay federal income tax are subject to the franchise tax.[1] All businesses that elect S Corp status past January 1, 2022, are taxed at a franchise tax rate of 5.5%.

Pass-Through Taxation

With pass-through taxation, owners pay most of their company taxes on their personal income tax returns. This occurs because the company’s income “passes through” to the shareholders, who each pay taxes on their share of the revenue.

The personal income tax rate is generally lower than the corporate rate, which means company owners pay lower taxes overall. The business entity is only responsible for paying taxes on built-in gains and passive income.

LLCs and C corps that don’t elect S corp tax status also pay corporate taxes on company revenue. This is double taxation, as the company is taxed once, and shareholders are taxed again during a sale of stock or distributions.

Requirements for Forming an S Corporation in Florida

Before you elect S corp status for your limited liability company, ensure your business is eligible. 

S corps are generally best for small businesses, but not all businesses qualify. For example, financial institutions such as banks, credit unions, and insurance companies can not be S corporations. Businesses that get most of their revenue from exports are also not eligible.

It’s essential to note that all S corporation shareholders are considered employees. As such, they must receive a reasonable salary and run payroll. Additionally, the company must meet the following IRS requirements for S corporations:[2]

• Be an eligible domestic LLC or corporation

• Have shareholders (individuals, estates, and certain trusts) who are US citizens or resident aliens

• Have no more than 100 shareholders

• Have only one class of stock

The requirements for S corporation status can be confusing. Our online service takes the hassle out of your hands, so you can rest assured you don’t miss a thing.

How to File as an S Corp in Florida in 7 Steps

You must form an LLC or a C corporation before filing as an S corporation in Florida. Follow these seven steps to create your business structure and get closer to S corp status.

Step 1: Choose a Business Name

Before designating an S corporation in Florida, you must choose your business name. You’ll want to take your time to choose a name that’s easily searchable by potential customers and describes the nature of your products or services. Avoid confusing names, as well as those that sound like other companies. 

Your business name must follow these Florida business name regulations:

• Must include the phrase “limited liability company” or “LLC” 

• Must be distinguishable from other businesses in the state

• May not include wording that could mislead people into thinking the company is connected with a state or government agency

• May not use wording that infers the company participates in unlawful acts

• May not use wording that relates to services or products not included in the Articles of Organization

• May not use restricted words, such as university, without accompanying verified paperwork 

Once you have the perfect name, you should complete a business name search to ensure that another company is not already using it. Our free business name search lets you quickly and easily see if your chosen name is available in Florida. If it is, you can reserve it as you complete your incorporation for up to 120 days.

It’s also advisable to trademark your business name to prevent competitors from imitating your brand or using your name. You can file for a federal trademark with the United States Patent and Trademark Office (USPTO) for nationwide protection or apply for a state trademark with the Florida Department of State.[3, 4]

Step 2: Appoint Directors and a Registered Agent

Suppose you’d like to elect S corporation status. In that case, you must appoint a board of directors to manage the company. S corporations must also elect up to 100 shareholders. 

Florida law requires that all businesses appoint a registered agent. This role is filled by an individual or organization authorized to receive official correspondence and documents for a company. 

While you can appoint an individual from your company to serve as your registered agent or choose to fulfill the role yourself, it’s not always recommended. A registered agent must have a physical Florida address listed on the public record and be present during regular business hours. These are just some reasons you might find hiring a registered agent service a better option.

We can fill out your S corp paperwork, file on your behalf, and fulfill your registered agent duties in one simple order.

Step 3: File Articles of Organization

The Articles of Organization officially register your LLC in Florida. Also known as the Certificate of Formation, this document requires the following information:

• Company LLC name

• Principal business address

• Registered agent name, address, and signature

• LLC purpose

• Name(s) of those authorized to file company paperwork

• Business effective date 

• Signature from an authorized member 

Note that, unless otherwise indicated, the business effective date is the date the Division of Corporations receives and files your Articles of Organization. The selected effective date is valid up to 5 days before the Division of Corporations receives your files and 90 days after.

We can get you up and running as quickly as possible by handling all the LLC paperwork on your behalf. Alternatively, you can file your Articles of Organization with the Florida Department of State with a $100 filing fee.[5] You must also pay $25 for your registered agent designation.

If desired, you can also request a certificate of status, which verifies the existence of your LLC, for $5 and a certified copy of your Articles of Organization for $30.

To maintain active status, LLCs in Florida must also file an annual report between January 1 and May 1. This report confirms or updates your company’s information.

Step 4: Create an S Corp Operating Agreement 

While Florida law does not require an operating agreement, it is advisable to draft one. LLCs that don’t have this legal document are subject to default regulations outlined in the Florida Revised Limited Liability Company Act.[6]

An operating agreement outlines your company’s bylaws, including the duties and responsibilities of the business owners. It also details vital operational information, such as the distribution of profits and shareholder contributions.

Here’s a complete list of what to include in your operating agreement:

• Member names

• Member duties, in terms of monetary and service contributions

• Economic interests for business profits and property and if they’re transferable to third parties

• Distribution provisions for profits

• Voting procedures and requirements for decisions

• Manager authority and responsibilities

• Rules on how the company dissolves when necessary

The operating agreement is legally binding once signed by all parties. Keeping asset protection provisions in mind is essential. An operating agreement without this section significantly reduces a creditor’s ability to seize assets or income.

Step 5: Apply for an Employer Identification Number

You must obtain an Employer Identification Number (EIN) from the IRS to open a bank account, hire employees, and begin business operations. EINs are like social security numbers for companies because they allow the IRS to identify your business and track your employment and income taxes. 

You can apply for an EIN on the IRS website, or we can obtain your EIN for you for free.[7]

Step 6: File Form 2553 for S Corporation Election

The most critical and final step is to file IRS Form 2553, which elects S corp status for your business entity.[8]

Form 2553 requires the following information:

• Company EIN

• Date of incorporation

• State of incorporation

• S corp election date

• Selected tax year 

• Indication of whether family members are one shareholder

• Contact information 

• Name and address of shareholders

• Percentage of stock owned by shareholders

• Selected fiscal year

• Signatures

You must file form 2553 during one of these three periods:

1. Within 75 days of forming an LLC or C corporation

2. Anytime in the year before the selected tax year

3. No more than 75 days after the beginning of the tax year chosen

If you miss the filing deadline for form 2553, you must also file Form 8832, Entity Classification Election.[9]

Florida S Corp vs. Florida LLC

S corp status has pros and cons, meaning it isn’t the best solution for every business. Some business owners might find that remaining a limited liability company is best for tax purposes. Either way, we recommend considering the advantages and disadvantages before proceeding.

Advantages of Starting an LLC in Florida

A Florida LLC is one of the most straightforward corporate structures to set up and maintain. Owners can enjoy flexibility with no restrictions on the number of members or the type of management structure.

LLCs shield personal assets regarding business debts. This protection means your assets, such as your home and car, cannot be seized to cover company debt.

LLCs also have the benefit of pass-through taxation. Business profits and losses go directly to members and are taxed and credited on their personal income tax returns. This avoids double taxation at both the individual and corporate levels. 

If you’d like to finish setting up your Florida LLC, we can handle the filing so you can focus on your business. 

Disadvantages of Starting an LLC in Florida

Florida LLCs have a $100 initial filing fee and a $25 registered agent fee. After that, you must pay $150 annually to file your annual report.[10] You are also responsible for self-employment and federal tax payments.

If you choose to transfer ownership later, it can prove challenging. The transfer must be approved and spelled out in the operating agreement, or you cannot pass your business on.

Advantages of forming an S Corporation in Florida

Like LLCs, S corporations offer personal asset protection. However, the main benefit of S corp formation in Florida involves tax treatment. 

In addition to benefiting from pass-through taxation, S corp shareholders pay self-employment and personal income tax on a reasonable salary rather than the entire amount. Any remaining profits allocated to each shareholder are not subject to self-employment tax. This results in significant tax savings.

Disadvantages of forming an S Corporation in Florida

S corporations are limited to 100 shareholders and only one class of stock. If you are planning exponential, rapid growth, there are better choices than this classification for your company. If you seek international partners, it’s also essential to note that only US citizens, resident aliens, and certain estates and trusts qualify as shareholders. 

An S corp requires more paperwork, including running payroll, which means you must factor in additional administrative costs. Business owners should also know that the IRS closely monitors companies with an S corp designation to ensure tax compliance. If you make an error, you can lose your status.

Get the Legal Benefits of an LLC with the Tax Benefits of an S Corp

An S corp requires more paperwork, including running payroll, which means you must factor in additional administrative costs. Business owners should also know that the IRS closely scrutinizes companies with an S corp designation to ensure tax compliance. If you make an error, you can lose your status.

Ready to File for S Corp Status in Florida?

If you’d like to save time and ensure you file for S corp status correctly, we can help. Our experienced business formation specialists will quickly and efficiently set up your S corporation. You can enjoy expert help throughout the process.

Frequently Asked Questions

What is an S Corporation in Florida?

An S Corporation is not a formal business entity but an IRS tax election only available to eligible companies. S corporations feature additional tax benefits, including pass-through taxation. Losses and income flow through to company owners’ individual tax returns, who then pay taxes on a reasonable salary.

Does Florida recognize S corporations?

Yes, Florida recognizes S corporations that remain in good standing.

What is the turnaround time for filing for S corp status with the IRS?

A business should receive a determination from the IRS 60 days after filing Form 2553.

What is the difference between an S corp and an LLC?

LLCs and S corporations feature pass-through taxation, but S corps offer significantly more tax savings. S corp shareholders pay self-employment and personal income tax on a reasonable salary. The remaining profits can be withdrawn as a distribution without paying any additional taxes.

What are the requirements for an S corporation in Florida?

A company must meet the following requirements to qualify for an S corporation in Florida:

• Be an eligible domestic LLC or corporation

• Have shareholders (individuals, estates, and certain trusts) who are US citizens or resident aliens

• Have no more than 100 shareholders

• Have only one class of stock

Are taxes for LLCs and S corps the same?

S corporations experience significantly more tax savings than LLCs. Both business entities share pass-through taxation, but LLC shareholders pay self-employment and personal income tax on the total amount earned. In contrast, S corporation owners pay tax on a “reasonable salary,” and any remaining profits can be distributed to respective shareholders with no additional tax.

What is the S corp tax rate?

The S corporation tax rate depends on shareholder personal tax rates, which run between 10% to 37%.[11]

How do I dissolve an S corporation in Florida?

When dissolving an S corp in Florida, you must obtain approval from company directors or shareholders. You will then file your Articles of Dissolution with the Florida Department of State Division of Corporations and pay a $35 filing fee.[12]

Bibliography

1. Florida Department of Revenue. “Florida Corporate Income Tax. Who Must File.” Accessed December 29, 2022.

2. Internal Revenue Service. “S Corporations.” Accessed December 29, 2022.

3. United States Patent and Trademark Office. “Trademark basics.” Accessed December 29, 2022.

4. Florida Department of State. “Trademark and Service Mark.” Accessed December 29, 2022.

5. Florida Department of State. "Instructions for Articles of Organization.” Accessed December 31, 2022.

6. Florida Legislature. “Title XXXVI Business Organizations Chapter 605, Florida Revised Limited Liability Company Act.” Accessed December 31, 2022.

7. Internal Revenue Service. “Apply for an Employer Identification Number (EIN) Online.” Accessed December 31, 2022.

8. Internal Revenue Service. “Form 2553.” Accessed December 31, 2022.

9. Internal Revenue Service. “Form 8832.” Accessed December 31, 2022.

10. Florida Department of State. “File Annual Report.” Accessed December 31, 2022.

11. Internal Revenue Service. “IRS provides tax inflation adjustments for tax year 2022.” Accessed December 31, 2022.

12. Florida Department of State Division of Corporations. “E-File Articles of Dissolution.” Accessed December 31, 2022.