An S Corporation is a business elected for its status through the IRS. This business status allows the taxation of the company to be similar to a partnership or sole proprietor as opposed to paying taxes based on a corporate tax structure. Note that S corporations are taxed under Subchapter S of the Internal Revenue Code (IRC).
How to Form an S Corporation in Florida
An S corporation is created through filing articles of incorporation with the secretary of state or a similar governing body. It issues stock and is also governed as a corporation, with directors, officers, and shareholders who function in the same manner as their C corporation counterparts.
The owners (the shareholders) have the same protection from liability as shareholders of a C corporation. Note that an S corporation shareholder’s personal assets such as personal bank accounts, cannot be seized to satisfy business liabilities.
You can start an S corporation in Florida by forming a limited liability company or a corporation, and then electing S Corp status from the IRS when you apply for your EIN. You’ll need Form 2553 to start or convert your existing business into an S corp.
An S Corp is an IRS tax classification (Subchapter S), it is not a business structure. The Florida S Corp status is used to reduce a business’s tax burden. S corps have several restrictions, such as being limited to one class of stock and 100 shareholders.
Starting an LLC is the best way to form an S corporation because the advantages of forming a corporation are negated by S Corp restrictions. LLCs are also easier to maintain than corporations. These are two main ways to start an S Corp:
- By forming an LLC and electing S Corp tax status from the IRS when you request your employee identification number (EIN)
- By forming a corporation and electing S Corp status from the IRS
Having said that, it is advisable to settle for forming an LLC and electing S Corp tax status from the IRS when you request your employee identification number (EIN).
Steps To Start An LLC And Elect S Corp Status In Florida
STEP ONE: Name Your LLC
The first step is to choose a name for the business under US law. You should choose a name that complies with Florida naming requirements which will be easily searchable by potential clients. Your name must include the phrase “limited liability company” or one of its abbreviations (LLC or L.L.C.).
Your name must not contain language implying that the LLC is organized for an unlawful purpose or one not stated in its Articles of Organization. Your name must not contain language implying that the LLC is connected with a state or federal government agency or corporation.
Certain restricted words (e.g., Bank, Attorney, University) may require additional paperwork and a licensed individual to be part of your LLC. Your name must be distinguishable from any existing business in the state, except for certain fictitious name registrations, general partnership registrations, and limited liability partnership statements.
STEP TWO: Choose Your Florida Registered Agent
You are required to choose a registered agent for your LLC. A registered agent is a person or company that receives your LLC’s documents, notices, and legal mail (called Service of Process). For this reason, the agent must have an actual street address (PO boxes are not allowed by the state).
Picture your registered agent as your company representative to the state. It is important to note that not everyone can be a registered agent. But for a person to become a registered agent, the person or corporation must be a resident of Florida.
The individual or corporation must have a physical address within the state. Registered agents in Florida must consent to their appointment by signing the Articles of Organization in written or electronic form. Your friend or family members or a commercial resident agent are qualified to be your LLC’s Resident Agent in Florida.
STEP THREE: File the Florida LLC Articles of Organization
Articles of incorporation are the foundational document for LLCs, C-corporations, and S-corporations. You have to file these documents with the state for your corporation to exist. The information that goes into the articles of incorporation will vary based on what state you’re in, it includes the following:
- Business’s name, address, and principal place of business
- Purpose of the corporation
- Number and type of shares (if the corp is issuing stock)
- Names and addresses of the initial board of directors
- The registered agent for the corporation (person or company who will accept official mail and legal papers on the company’s behalf)
- Name, address, and signature of the incorporator who is submitting the form (usually you, your attorney, or an incorporation service if you’re using one).
OPTION 1: File Online
– OR –
OPTION 2: File by Mail
State Filing Cost: $125, payable to the Florida Department of State (Nonrefundable)
Mailing Address:
New Filing Section
Division of Corporations
P.O. Box 6327
Tallahassee, FL 32314
STEP FOUR: Create an LLC Operating Agreement
An LLC Operating Agreement is a written contract among the partners of the business that clearly states who owns the S Corporation and how much of it they own. Your operating agreement will also document how the S Corporation is managed, how profits will be shared, and how taxes are to be paid among other related issues.
Having an Operating Agreement proves that the company is a separate legal entity from yourself. This helps maintain the personal asset protection provided by the S Corporation and it is very beneficial to have if you end up in court.
Note that an S Corporation Operating Agreement is an “internal document”, meaning that you don’t have to send a copy to the Department of Taxation, the IRS, or any other government agency. You only need to keep a copy of the Operating Agreement with your S Corporation business records and give a copy to other members, if applicable.
STEP FIVE: Get an EIN and Complete Form 2553 on the IRS Website
An EIN is a number that is used by the US Internal Revenue Service (IRS) to identify tax businesses. It is the social security number of a business. Note that EINs are free when you apply directly with the IRS.
During the online EIN application, the IRS will provide a link to Form 2553, the Election By a Small Business form. You can liken your Florida LLC’s EIN Number to the company’s “social security number”. It helps identify your LLC to the IRS for tax and filing purposes.
Florida LLC’s EIN will also be used when you open an LLC bank account, register your LLC with the Department of Taxation, and process employee payroll (if applicable).
STEP SIX: Get State and Regulatory Licenses and Permits
In Florida, in order to operate your LLC, you must comply with federal, state, and local government regulations. For example, restaurants likely need health permits, building permits, signage permits, etc. The details of business licenses and permits vary and their fees also vary depending on the kind of license you want to obtain.
STEP SEVEN: Taxes Requirements in Florida
In Florida, depending on the nature of the business, you may be required to register for one or more forms of state tax.
Sales Tax – If you are selling a physical product, you will need to register for a seller’s permit through the State of Florida’s website. This certificate allows a business to collect sales tax on taxable sales.
Sales tax, also called “Sales and Use Tax,” is a tax levied by states, counties, and municipalities on business transactions involving the exchange of certain taxable goods or services.
Employer Taxes – If you have employees in Florida, you will need to register for Unemployment Insurance Tax and Employee Withholding Tax through the State of Florida’s website.
Most LLCs will need to report their income to the IRS each year using:
Form 1065 Partnership Return (most multi-member LLCs use this form)
Form 1040 Schedule C (most single-member LLCs use this form)
Recommendation: You’ll need to speak with an accountant to determine your tax reporting and filing requirements. Figuring out your tax filing requirements can be very complicated and if filed improperly, it can lead to penalties, fines, and interest. We recommend working with an accountant to make sure you meet your federal, state, and local tax obligations.
STEP EIGHT: Open a Florida LLC Bank Account
Once the IRS has issued an EIN Number to your Florida LLC, you can open a business checking account. It is good to have a business checking account for your Florida LLC in order to maintain your personal liability protection. Using a personal bank account for your LLC is called “commingling of assets” and this can lead to personal liability issues if you end up in court.
Having a separate business bank account for your Florida LLC makes record-keeping easier for accounting and tax purposes. Since banks in Florida have their own rules and regulations, it is recommended to call a few places to determine the following:
- Minimum initial deposit
- Minimum balance requirements
- Monthly maintenance fees (if any)
Required Florida LLC paperwork: In order to open a business bank account for your Florida LLC, you will need to have the following:
- Articles of Organization (stamped and approved)
- State Business License
- Initial List of LLC Managers or Managing Members
- EIN Confirmation Letter from the IRS
- Photo ID (driver’s license and/or passport)
- Operating Agreement (it may not be required, but it is good to have it)
N.B: Call the bank ahead of time and double-check what documents are required. If you have a Multi-Member Florida LLC, all members that want to be on the bank account should be present when opening the account. Most banks will provide a business debit card on the spot after the account is opened.
If not, they’ll mail the debit card in 1 to 2 weeks. If you are a non-US resident that has formed an LLC in Florida, you can still open a U.S. business bank account.
STEP NINE: Obtain a Florida Business Phone Number
In Florida, international best practices require that you obtain a business phone number for your company as against making use of your own private number. You can get a local Florida telephone number or you can get a “1-800” number for your business.
There are many options to choose from when it comes to an official phone number, but ensure that you choose a telecom company that will serve your business better.
Conclusion
Aside from the documents and requirements stated above, you would also need an Election by a Small Business Corporation (Form 2553). Form 2553 states a corporation’s intent to become an S corporation.
The form must be filed within two months and 15 days after the beginning of the tax year—or March 15, if the corporation follows the calendar year—in which the election is to take effect. The form must list all corporate shareholders at the time of the election and each shareholder must sign and date the form. It takes about two months for the IRS to approve the filing.