How To Open a Business in Florida
The Sunshine State is a great place for starting a business, thanks to its growing economy and entrepreneur-friendly laws. While there are a few steps involved in registering a new business in Florida, the outlook is very good.
According to the Chief Executive’s CEO survey in 2022, Florida was the second-best state for doing business. Florida was also the fourth largest economy in the United States as of Q3, 2022 (Bureau of Economic Analysis). Finally, Florida had the third-largest civilian labor force in November 2022 (U.S. Bureau of Labor Statistics), so you shouldn’t have any problems finding skilled employees.
As a bonus for entrepreneurs, Florida business owners enjoy lower tax rates than business owners in other states: Florida doesn't have a personal income tax, capital gains tax, or death tax, and the Florida Department of Revenue offers several different tax credits that can help to offset the low corporate tax rate of 5.5%. So, how do you open a business in Florida?
Step 1: Hone Your Business Idea
Florida offers a wealth of opportunities to entrepreneurs who can find a high-demand gap in the market, so your first step is conducting market research to find a business idea that is likely to do well.
According to the Florida TaxWatch 2022 Economic Preview, the industries that were projected to experience the greatest growth in 2022 were:
Leisure and Hospitality + 10.6%
Professional and Business Services + 9.1%
Information + 7.2%
Wholesale Trade + 4.4%
Financial Activities + 4.1%
Government + 3.4%
Education & Health Services + 2.5%
Construction + 1.2%
Manufacturing + 1.0%
Transportation, warehousing, and utility industries were projected to experience a 1.1% decline in 2022, and retail trade was projected to experience a 5.2% decline. However, these are still major industries in Florida and are worth considering if you can find locations that are underserved in these areas or gaps in the market that you know you can fill.
Tax Credits Offered by the Florida Department of Revenue
The Florida DOR offers tax credits to businesses in specific locations and industries, which are worth taking into account at the planning stage. For example, tax credits are available for corporations that:
Produce renewable energy
Work in the entertainment industry
Have a significant project proposal in the transportation, silicon technology, or solar panel industries
Create new jobs in designated rural communities
Create new jobs in designated high-crime urban areas
Employ student interns
Rehabilitate brownfield sites or sites contaminated with dry-cleaning solvent
Operate a commercial hazardous waste recycling facility
Invest in research and development
Make eligible charitable contributions
Contribute to eligible nonprofit scholarship organizations
Build low-income housing projects in urban areas
Step 2: Create a Business Plan
Once you've brainstormed ideas for your new business and conducted market research with your target audience, you'll need to create a business plan that covers everything from an estimate of your startup costs and an operating budget for the first year to your business structure, business location, key competitors, and the central mission of your business.
At this stage, it's important to consult with a Florida small business accounting professional or a Florida outsourced CFO to understand the pros and cons of different business structures, tax filing obligations, and accounting methods, and to identify possible sources of funding.
Step 3: Choose a Business Structure
Your business or company structure defines the way you will be seen by the law, the government, and taxation departments. Each type of business entity has pros and cons, and some will be more suitable for your business idea than others.
Sole Proprietorship
A sole proprietorship business structure is most appropriate for small, one-person businesses that are just starting out. If you choose this business type, all of your business income will be considered personal income and you will be held personally liable for business debt and lawsuits against your business.
As a sole proprietor, you may need to charge and pay sales tax to the state of Florida and will pay self-employment taxes to the IRS. As there is no personal income tax in Florida, you won't pay tax to the state on your earnings. However, you'll still pay income taxes to the IRS.
General Partnership
A general partnership is like a sole proprietorship except that the business is jointly owned by two people. Your business income is divided and taxed individually, and both partners are liable for business debt and lawsuits against the business. Generally, a general partnership is dissolved if one partner leaves or dies, which is something to keep in mind when forming this kind of business.
Limited Liability Company (LLC)
A limited liability (LLC) company is a separate legal entity, which means that your personal and business expenses are kept separate and your personal assets are not at risk. As far as taxation, an LLC can be taxed as a sole proprietorship, partnership, or corporation (though additional steps are required to establish a corporate taxation structure). A Florida tax planning expert can explain the options and help you choose the most appropriate taxation method for your business.
Limited Liability Partnership (LLP)
Like the business entities described above, an LLP uses a pass-through taxation method (each member pays taxes on his or her share of the business profits). Like a general partnership, each partner is personally liable for business debts. However, with this business structure, each partner is protected from the business partner's liabilities. LLPs are popular with professionals like accountants, architects, and attorneys.
Corporation
Corporations are separate legal entities like LLCs but have shareholders, directors, and officers. They also need to hold shareholder meetings and keep stringent corporate records. Small corporations may qualify as S-corporations and follow a pass-through taxation model. Large corporations will usually be C-corporations that are taxed both on business profits and individual shareholder distributions.
For-Profit and Nonprofit Businesses
Besides the business structure itself, you can register as a for-profit or nonprofit company. Non-profit companies are often exempt from some kinds of taxation but still need to file an F-1120 or F-1120A. A small business accountant can help you create a realistic nonprofit operating budget that helps you meet your project budgets and reporting requirements.
Step 4: Designate a Registered Agent
LLCs, LLPs, and corporations in Florida need to name a registered agent who will receive official business correspondence. If you choose, you can be your own registered agent or you can pay someone else to provide third-party registered agent services.
Step 5: Register Your Business with the Florida Department of State (DOS)
If you choose a limited liability or incorporated business structure, you will register your business with the Florida Department of State (DOS). You can do this yourself using the forms on the Division of Corporations web page or hire a business formation company to fill out and submit the forms on your behalf.
The information you will need to provide on the registration form includes:
A unique company name (see if your chosen name is available on the Florida Department of State’s database)
A federal employer identification number (EIN) unless you are an LLC with no employees. You can register for an EIN by filing Form SS-4 with the IRS.
Your full name
Your business address and mailing address
The name, contact details, and signature of your registered agent
As of January 2023, the fees for registering a new Florida business yourself are:
A filing fee
$100 for a new limited liability company
$965 for a new limited partnership
$35 for a new corporation
A registered agent designation fee
$25 for a limited liability company
$35 for a limited partnership
$35 for a corporation
Step 6: Register a "Doing Business As" Name
Your official business name might be your own name or an official company name. However, if you want to trade as something else, you need to register this name with the Florida DOS. For example, a landscape gardener in Jacksonville, FL, might file taxes as John Smith with the DOS but wants to trade as "Paradise Landscaping." In that case, he would have to register "Paradise Landscaping" as his DBA or fictitious name. Registering a fictitious name with the Florida DOS costs $50.
Step 7: Register with the Florida Department of Revenue (DOR)
Once your business is registered, go to the Florida Department of Revenue website, read or download the New Business Start-Up Kit, and fill out the interactive wizard to ascertain your business's exact tax requirements. Most businesses that offer goods and services will need to register as sales and use tax dealers. Corporations will need to fill out Florida Form F-1120 to file Florida Corporate Income Tax. Please note that you will also need to report any new hires and rehires on the Florida DOR website.
Step 8: Secure Funding
Identifying potential sources of funding is part of creating a business plan. Then, once you have a registered business, you can apply for those sources of funding. Common ways to fund business startups include:
Business startup loans
Business credit cards
Equity crowdfunding
Small business grants
Angel investors
Small Business Administration (SBA) loans
Family and friend loans (these should be considered with caution as they can put relationships at risk)
If you haven't already opened a business bank account, you can do that now. Having your business bank account with the same bank that provides a loan or line of credit to your business can help to streamline your financial management. However, it's best to shop around before deciding on a bank and the exact financial services you’ll use.
Step 9: Obtain Any Necessary Business Licenses
Skilled trades usually need to obtain a permit or business license in order to practice in the state of Florida. You can find information about registration, license, and permit requirements on the State of Florida’s Business Information Portal. You can find county-specific requirements on the Open My Florida Business website. Depending on your industry, your license may be provided by the:
Florida Department of Business & Professional Regulation (Florida DBPR)
Florida Department of Agriculture & Consumer Services (FDACS)
Florida Department of Health (Florida DOH)
Please note that business licenses are still required for sole proprietors in the relevant professions even though they aren’t required to formally register as a business with the Florida DOS. If you will trade as a sole proprietor, obtaining the relevant licenses and permits is the main step you will need to take before you can start to trade.
Step 10: Set Up Your Finances
Before you start generating income, it's essential to put systems in place that will help you keep accurate and up-to-date records and ensure you file accurate estimated tax payments and annual tax returns. At this stage, an accountant can:
Help you choose an accounting method that's appropriate for your business type
Explain the pros and cons of in-house bookkeeping vs outsourced small business bookkeeping
Provide QuickBooks training
Explain the relevant Florida tax deductions and establish a filing system for receipts
Help with strategic tax planning
Step 11: Purchase Insurance
Once you're all set up and ready to go, there's just one final thing you need to do, and that's purchase business insurance. Florida businesses must compulsorily maintain workers' compensation insurance and have unemployment insurance, paid via the Florida reemployment tax. You may also need other types of insurance, such as malpractice insurance for medical practices and public liability insurance for construction companies. A business lawyer can provide industry-specific advice.
Start Your Florida Business and Enjoy the Rewards
While there are several steps involved in opening a business in Florida, investing time in research, planning, and completing the steps to registration are essential for long-term success.
With a strong foundation and expert advice, you'll be able to launch your business with confidence, avoid costly mistakes, and optimize your finances for a healthy financial future.
