How to set up an LLC in Florida, and what tax rate to expect

LLC in Florida

The LLC (Limited Liability Company) is flexible and is the most popular US legal form of company for good reasons. But setting an LLC up can vary from state to state. This guide outlines how to set up an LLC in Florida and what you would expect to look out for in taxation as a result?

LLC in Florida: overview

Florida is not only valued by many companies because of the sun; the Miami-Fort Lauderdale business location in particular is ideal for building a stepping stone to business success.

The sunny state of Florida is mainly known for being very popular with retirees and tourists. Florida is also very interesting for real estate transactions and investing in tax liens. Florida is an attractive state because of its relaxed bureaucracy. In addition, companies are only taxed slightly here.

Particularly noteworthy is the uncomplicated establishment of companies in Florida. This goes completely online without a signature or identity verification. Neither a personal visit to the notary nor a passport copy or even further documents are necessary. There is no share capital and the company can be dissolved again relatively easily. In most cases, all you need to do is send a dissolution form to the responsible Secretary of State.

LLC Florida cost and requirements

A Florida implementation of an LLC can also be set up inexpensively. The cost of setting up a company with service starts around $100 to $150. Advantages of incorporating a company in Florida include personal liability protection, tax benefits, and ease of administration.

Florida is very liberal with its regulations for founding a company. As a one-man company (Sole Director) you can hold several positions, such as President, Treasurer or Secretary. Any citizen over the age of 18 can form a Florida company and accept any position in the company.

A notarial meeting is not required for the establishment, as is customary in some other states. There is also not a mandatory minimum capital requirement, the company can be founded without share capital. The partners / shareholders are not entered in the commercial register and can therefore remain anonymous if they wish. If the LLC is founded in Florida, the Florida State Income Tax does not apply if the LLC is classified as a partnership. Even if this did not happen, a low tax rate of only 5.5% would be paid to the state of Florida. Added to this is the Federal Income Tax for each state, which varies from 15% to 39% depending on profit.

The annual commercial registry fees are also relatively cheap compared to other states. You can pursue any corporate purpose with a Florida company that does not require special permission, such as crafts, car trading, banking, etc.

Cost of company closure generally corresponds to the annual fee in each state are also sent and may in cash. Alternatively, if the annual fee has not been paid, the company can be forcibly dissolved (administrative dissolution). Apart from the fact that you have to pay all annual fees when you start a new business in the same state, this has no disadvantages whatsoever.

What is an LLC?

Let’s go back to LLC in general first. A limited liability company, or more commonly known as an LLC, is a type of legal entity. This business object is most preferred by entrepreneurs, investors and small business owners because of the many advantages of a business entity.

An LLC offers a number of advantages over other forms of business when it comes to setting up a business.

The company can be set up by an individual and, depending on the state, even anonymously, there is only limited liability, taxation can be freely chosen and the LLC even offers tax advantages.

Generally speaking, the state for the company formation can be freely chosen. Even if the company owner wants to employ employees, he can usually set up his company as a holding company in a state of his choice. When founding an LLC you should ask yourself what you want to use the company for.

Taxing your company

When starting a business, you should not only look to an appropriate state, but also to the taxation of your LLC. Some points about this:

  • Most LLCs are classified as partnerships. This means that taxes are not incurred for the company, but only for the owner. The owner must then file an income tax return.
  • In the case of an LLC, it should be noted that the tax levies also depend on the choice of taxation. For example, an LLC can also be taxed at the corporate level. Which taxes have to be paid and in what amount can therefore be very different.
  • Which taxation is most suitable for the investor needs to be clarified in each individual case.
  • In the case of an LLC, taxes are payable on the profits, just like profits from tax lien investments.
  • US overseas LLC owners must pay US income (profits) tax. The tax charge is typically between 25% and 35%, unless state-level tax is payable in the state in question.
  • Due to the Trump tax reform, 20% of the profits of partnerships are tax-free if certain conditions are met. In this case, for an LLC up to an income / profit of $ 157,000, 20% of the profit can be tax-free.

Tax levies for LLC companies

The tax calculation for the LLC can be quite complex. This is because the tax levies can vary greatly depending on the LLC.

Which elements affect the tax calculation? The amount of the tax on the profits of the LLC depends, for example, on the number of members and the assessment of the taxation (LLC-Single Member, LLC-C Corp, LLC-S Corp, LLC-Partnership).

The tax levies also depend on whether the LLC is classified by the IRS as a partnership, corporation or “disregarded entity”. The state also plays an important role, as there are states that offer tax advantages. The LLC partner’s place of residence can also have an impact on tax charges.

Due to the very different tax regulations depending on the individual circumstances of the LLC, it is generally useful to consult a tax advisor on tax matters. The complexity of taxation should not prevent future investors from founding a LLC and investing in tax liens. The primary thought in forming an LLC should be generating income. If income is generated, an expert tax advisor can be employed.

Sample calculations for tax levies

In the case of an LLC, the tax exemption on profits can be 20% if certain conditions are met (restrictions apply). A simplified example is:

  • An LLC owner has an annual profit of $75,000.
  • He is only liable to pay $60,000 in tax due to the tax credit.
  • His taxable income is taxed at 25%.
  • If the owner qualifies for the 20% tax allowance, the tax will be only $ 15,000.