Leaving a job and starting as a business owner is a big step. There are many variables to consider when deciding to go on your own. Here we will discuss some less familiar topics that deal with forming an LLC in Florida.
Consider whether you need to form a legal entity altogether.
Ensure you are forming the LLC for the right reasons. The main reasons why someone would choose to form an LLC are:
b) professional association
c) legal protection
d) tax purposes
1. Choose a Name for your Florida LLC
Follow The Naming Guidelines
- Must Include: the phrase “limited liability company” or one of its abbreviations – LLC or L.L.C.
- Cannot Include: words that could be confused with a government agency.
- May Require: additional paperwork and a licensed individual.
Check The Name Availability
Run a search in the Florida Division of Corporation to determine if the desired name is available. If it’s taken by another Florida LLC, come up with an alternate name for the business.
Check The URL and Domain Availability
It helps if the business website address matches the business name – check the domain availability for the business name you plan on using.
2. Appoint a Registered Agent
We tend to use and recommend Northwest Registered Agent.
What’s A Registered Agent?
US states and jurisdictions make it mandatory for newly organized entities to designate a registered agent for the agent to accept court process service on behalf of the business.
Who Can You Elect As A Registered Agent?
In some situations, you can act as your registered agent. Doing this would save you the additional costs, but would expose your Florida LLC to unwanted, unsolicited mail advertisements of all sorts. If you move, you would also have to ensure your address is updated with the Florida Division of Corporations, or else you may miss important communications from the State.
3. File Articles of Organization
Once these steps are completed, you are ready to file Articles of Organization with the Florida Division of Corporations. Head over to the State’s electronic filing page, and follow the prompts to file Florida LLC Articles of Organization. You will need the following information:
- Effective date – if the desired start date is in the future, enter the date, otherwise leave it blank
- Limited Liability Name that was selected in Step 1
- Principal address of business (cannot be a P.O. Box)
- Mailing address
- Registered agent name and address, as well as full individual name – make sure to obtain this information from the registered agent such as Northwest Registered Agent
- Name and email address where you would like to receive the completed Articles of Organization and future annual report reminders
- Name and address of persons authorized to manage LLC – this is a critical step! In Florida, an LLC can appoint Managers (MGR), Members (AMBR), an Authorized Representative (AR), or Authorized Person (AP)
- An Authorized Representative (AR), Authorized Person (AP), or Authorized Member (AMBR) is a person who is authorized to execute and file records with the Florida Division of Corporations.
- If not all of the members of an LLC will not have the authority to manage or act on behalf of the business entity, then the LLC will be manager-managed.
- The members elect a person who will have the authority to manage or act on behalf of the company. That person will serve in the capacity of a manager (MGR). A manager (MGR) may or may not be a member of the limited liability company.
- Entering only one member here will mean the LLC will be considered a Single-Member LLC and therefore disregarded as a separate legal entity for tax purposes. Entering more than one member will result in the creation of a Multi-Member LLC, considered a partnership for tax purposes.
4. Prepare an Operating Agreement
The Importance Of An Operating Agreement
An operating agreement is a document that spells out all essential aspects of running the business. How the profits and losses are to be treated, capital contributions and withdrawals, the roles each member will play – all of these are to be spelled out in the operating agreement. In the future, if any dispute arises between the members, they can refer to the operating agreement to follow what was agreed upon.
Without an operating agreement, you would have to rely on the operation of law, which is not always rational or as expected. You would also lose the formality and the legal separation of the LLC from the individual – which is probably the main reason for forming the LLC in the first place.
5. Get an Employer Identification Number (EIN)
What Is An EIN?
An EIN stands for an employer identification number. This number is much like a social security number or equivalent for individuals but used to identify and administer taxation to separate legal entities. The format is different from the social security number and is formatted this way xx-xxxxxxxx as opposed to this way xxx-xx-xxxx.
Why Is It Required?
Certain circumstances make it mandatory to apply and obtain an EIN. The IRS has a list of situations that require a newly formed entity to receive this tax identification.
Where Can You Obtain One?
You may obtain one directly with the IRS online, or by completing IRS form SS4 and faxing it over for processing. Certain situations require a faxed form, and application via online for same-day processing is not an option.
Do you still need an EIN if you have no staff?
Technically a single-member LLC does not need an EIN without any employees.
Note that when an individual owner conducts ongoing business matters as an individual as opposed to as an LLC, that will likely result in the LLC not serving the owner properly. The LLC not offering the legal protection it was designed for is known as piercing the corporate veil.
Avoid some common pitfalls after forming your LLC:
- Don’t open a business account with the LLC name but use a personal tax ID for business banking or loan applications
- Don’t sign business contracts, leases, or other business-related documents with your name as opposed to using the LLC name
- Don’t transact with your personal banking or credit for the business
- Don’t avoid filing and paying the required annual fees and forms required by the state
- Don’t use your name on letterhead, invoices, and business cards – use the LLC name everywhere it is appropriate to do so
6. Comply with Other Tax and Regulatory Requirements
Sales taxes are state-level taxes, and one would need to register for sales taxes with the applicable state to comply with the state tax rules and regulations.
Sales taxes are coined as trust taxes because the government agencies “entrust” an entity to collect and remit the taxes accordingly.
Sales taxes are not applicable on a federal level of taxations, so the IRS would not shed any light on these types of taxes.
Sales tax registration has specific timing one needs to follow to be compliant.
Employment taxes are trust taxes too. Employment taxes get administered on both the federal and the state levels. Registration, form filing, and tax remittance will be done on both levels of taxation.
It would be essential to use specialized tax software to have payroll and sales tax filing and payment running smoothly. Due to the sensitive nature of trust taxes, penalties tend to be much heftier than other tax types.
Industry Specific Taxes
Some other examples of industry specific tax types would include the following:
- Highway use
- Tobacco or firearm
Seek Professional Advice on Tax
Navigating the maze of state and federal regulations is complex, and an incorrect choice may leave you exposed to potential problems down the road. If one misses a required registration, they could be facing additional penalties, or would not be in compliance with the law. On the other hand, if one registers without a clear business requirement, they will have unnecessary filing requirements going forward, costing additional money to the business.
That’s why it’s important to recruit a knowledgeable and experienced professional to help with the entire business start-up phase. Contact us today to get your business formation off to a great start.
Misclassification of employment issues
When transitioning employment relationships from an employee to a contractor, you need to be careful. Typically an employer may improperly categorize an employee as a contractor for their own convenience.
By shifting you to a contractor pay type, a 1099-MISC recipient, the employer is reducing many accounting costs, insurance risks, and legal ramifications associated with having an employee on the payroll. You may want to steer clear of such an engagement. If you are not sure if you are miscategorized, seek authority from an accountant that specializes in employee classification issues. You can also turn to the IRS for more guidance.
7. Stay Up to Date With Annual Reports
Mind The Due Date
Each state will have its own rules and regulations and version of an annual filing that are required to be kept and to stay compliant and to retain the LLC name. Some states will have multiple filings and payments due. For example, NYS, has a biannual filing and payment due for LLC, along with an annual LLC filing fee. The schedules and fees are subject to change.
There are late filing and payment penalties, and those will vary based on the state involved. Florida has some high late filing and late payment penalties, while other states are more forgiving. Regardless, not filing and paying on time will ultimately cause the LLC to be dissolved by the state for non-compliance. When a state dissolves an entity for involuntarily, that is referred to as dissolution by proclamation.
Method of Filing
The method of filing and payment will vary by state, as some states will accept the payment and filing via tax software, as well as directly on the state’s online portal. In Florida, you would only file and pay directly with the Florida Division of Corporation website at www.sunbiz.org.
Registering Your LLC is a Major Milestone for Your Business
An LLC is one of the simplest forms of doing business, and most times, conducting affairs as an LLC will not change taxation for the sole owner, single-member.
The LLC structure is a one size fits all type of entity and the LLC may elect to convert to a more sophisticated form of existence. For example, an LLC may choose to be treated as an S Corporation or a C Corporation for tax purposes.
Evaluate your options. Particular business or tax circumstances would be better suited to organize your business as a C Corporation or perhaps an S Corporation. Be very careful when choosing which entity you are going to need.
Consult with the professional. The above issues that may arise bring to light how important it is to speak with professionals who will help you avoid many common pitfalls of starting as an LLC.
A CPA Can Manage the Heavy Lifting On The Registration, So You Can Focus on the Actual Business! Speak to a CPA Today