No, LLCs in Florida are not expected to pay taxes. Note that the income of an LLC passes through to its members, who will then be tasked with paying individual income taxes on their shares. Owing to that, there are no tax return filing requirements for LLCs in Florida and that is one of the great benefits of the Florida LLC especially since paying taxes is not a requirement.
When it comes to LLC taxes, there aren’t any states friendlier than Florida in the United States. A Florida LLC is a pass-through entity, and this simply entails that the profits pass through the entity straight to its members. Members are then expected to pay taxes on their personal income tax returns.
A good number of states have annual franchise taxes or special business entity taxes, and almost every state mandates corporate tax on corporations. However, Florida has an entity-level tax on corporations in the state, but no special franchise or entity tax for LLCs.
Florida also has no state income tax, and this more or less means that LLC profits in the state of Florida are passed through to members, who are only expected to pay taxes on their earnings for federal income tax purposes.
An LLC in Florida is not expected to file a tax return because its income passes through to its members, who will then have to pay individual income taxes on their shares. For this reason, there are no tax return filing requirements for LLCs in Florida.
Taxes to Look Out For as an LLC in Florida
Although there are no tax return filing requirements for LLCs in Florida, your LLC will have to pay a wide range of other taxes to both the state and federal governments. These taxes include;
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1. State Taxes for LLCs in Florida
In the state of Florida, you will only have to pay sales tax to the Florida Department of Revenue. Depending on how your business is set up, you may also be expected to pay use tax or corporate income tax.
2. Florida Income Tax
Florida remains one of nine states that do not impose income taxes on LLCs.
3. Florida Sales Tax
If you intend to sell physical products (such as electronics, books, cars, furniture, appliances, raw materials, etc.) or certain types of services, have in mind that you will be expected to collect Florida sales tax at the point of purchase.
It’s also known as the Florida sales and use tax. You will also need to remit the taxes you collect to the Florida Department of Revenue. Ideally, the general Florida sales tax rate is 6 percent, with certain exceptions. City, county and local jurisdictions can also charge additional sales tax over and above that 6 percent base.
In the state of Florida, a good number of items such as bottled water, prescription drugs, vitamins, some grocery items, and even some pet food items are exempt from sales tax. The Florida Legislature provides a tax handbook with comprehensive lists of items exempt from FL sales tax.
4. Florida Corporate Income Tax
Note that the state of Florida levies a tax on certain businesses for the right to exist as a legal entity and do business in the state. This is most often referred to as a franchise tax, transaction tax, or privilege tax. However, in Florida, it’s better known as Florida Corporate Income Tax.
While it’s a must for Florida Corporations, it can also sometimes apply to LLCs, especially LLCs that are elected as corporations for tax purposes. Owing to that, it is imperative you reach out to your accountant or professional tax preparer to understand whether you are expected to pay the Florida Corporate Income Tax to guarantee compliance and avoid penalties.
5. Federal Taxes for LLCs in Florida
As the owner of an LLC, you will be expected to pay self-employment tax and federal income tax, both of which fall under “pass-through taxation.” However, it is important to note that Federal taxes can be very challenging to comprehend; therefore, ensure to consult with your accountant or professional tax preparer to guarantee that your Florida LLC is paying the right amount.
6. Federal Self-Employment Tax
Have it in mind that all members or managers who take profits out of the LLC will have to pay self-employment tax. Note that this tax is enforced by the Federal Insurance Contributions Act (FICA) and covers Social Security, Medicare, and other benefits.
The current self-employment tax rate is 15.3 percent. However, note that you still deduct some of your business expenses from your income when calculating the amount of self-employment tax you owe. The Internal Revenue Service offers an LLC the option to be treated as an S Corporation for tax purposes, as long as the business meets the stipulated requirements.
Note that by making this election, you can decrease the amount of self-employment tax you remit by declaring some of your income as salary and other income as distributions or withdrawals. Ensure to consult with an experienced accountant or tax preparer for more information on decreasing your LLC self-employment tax through an S Corporation tax election.
7. Federal Income Tax
As an LLC in the State of Florida, you will also be required to pay federal income tax on the earnings you receive from your LLC. Note that the amount you pay will most often depend on your earnings, deductions, income tax bracket, and filing status.
Don’t forget that you only pay federal income tax on profits you get from the business, subtracting certain deductions and allowances. This will include your tax-free amount, coupled with business expenses and other deductions for things like healthcare and some retirement plans.
8. Employee and Employer Taxes
If you pay employees, then you need to understand the different tax implications that come with those business duties. Ensure to reach out to your accountant to get proper guidance for your unique situation. Irrespective of whether you withhold federal employment tax, your employees may be expected to file their own tax returns.
9. Other Taxes and Duties
Depending on your industry, your LLC may be expected to pay other taxes and duties. For instance, if you sell gasoline, you will have to pay a tax on the fuel you sell. In the same way, if you import or export goods, you will be expected to pay certain duties. Ensure to reach out to your accountant about any other taxes or duties you may need to withhold or pay.
Florida LLC is a pass-through entity, and this simply entails that the profits pass through the entity straight to its members. However, LLCs can be treated as other business entities such as corporations, partnerships, or sole proprietors for tax purposes.
If the LLC files its federal income tax return as one of those entities, it will be expected to follow the same process of the entity it is elected to be taxed as. A consultation with an experienced business attorney can help you decide what will work best for you.