How to Start an LLC in Florida
The process of starting a business can be daunting if you have never gone through it before. You will need to develop a detailed strategy so that you avoid pitfalls and maximize your chance of success.
In addition to considering logistical issues, such as the best location for your business, you will need to meet legal requirements for establishing the business. These vary depending on the business structure that you choose.
A Limited Liability Company (LLC) is one of the most common types of business structures used by entities throughout the U.S.
LLCs combine certain aspects of partnerships and corporations, providing owners with the tax benefits of a partnership and the liability protection of a corporation.
In short, to start an LLC in Florida, you will need to file the Articles of Organization with the Florida Division of Corporations which costs $125. This can be done online at the MyFlorida Sunbiz website, by mail, or in person. The Articles of Organization is the legal document that officially creates your Florida Limited Liability Company.
Step 1. Choose a Name for Your Florida LLC
Choosing a company name is the first and most important step in forming an LLC in Florida.
You'll want to choose a business name that reflects your brand identity and doesn't clash with the types of goods and services you offer.
There are several guidelines you need to follow in order to make sure your LLC's name meets necessary requirements in Florida:
- Your LLC name must include the phrase “limited liability company”, or one of its abbreviations (LLC or L.L.C.).
- The name cannot include words that could confuse your LLC with a government agency (FBI, Treasury, State Department, etc.).
- Restricted words (e.g. Bank, Attorney, University) may require additional paperwork and a licensed individual, such as a doctor or lawyer, to be part of your Florida LLC.
Business Name Search & Reservation
Next, you need to make sure your desired name is available. You can do a name search on the Sunbiz Florida website.
Once you settle on a name you like, you need to protect it. There are several different ways to register your business name. Each way of registering your name serves a different purpose, and some may be legally required depending on your business structure and location.
Business Entity Name
Entity name protects you at the state level (General Partnerships, Corporations, and LLCs have to pick a name when filing for the entity and have to be uniquely named.
Registering the entity name will not provide much protection from anyone else from using the name, other than being able to register with the Secretary of State. Here you can check the availability of Florida business names.)
Trademark protects you at a federal level (a trademark can protect the name of your business, goods, and services at a national level).
Trademarks prevent others in the same (or similar) industry in the U.S. from using your trademarked names. Businesses in every state are subject to trademark infringement lawsuits, which can prove costly.
That's why you should check your prospective business, product, and service names against the official trademark database, maintained by the United States Patent and Trademark Office.
Doing Business As (DBA)
A DBA doesn't give legal protection, but might be legally required. In Florida "doing business as" is used when an organization wishes to operate with a name other than that which they registered as to when they initially started doing business.
For instance, if a coffee store initially named "Karen's Coffee" wants to do business as "Greenwich Village's Best Coffee" then the owners have to submit an application for a DBA in order to make the change.
The company can register their new fictitious name via the Florida Division of Corporation's name registration service.
Step 2. Appoint a Registered Agent
A registered agent is an individual or business entity responsible for receiving important tax forms, legal documents, notices of lawsuits, and official government correspondence on behalf of your business. Basically, a registered agent primarily acts as your LLC's main point of contact with the state.
Registered agents are also responsible for accepting service of process. That is, if your LLC should be sued, your registered agent will accept the legal summons on your LLC's behalf.
A registered agent must be a full-time resident of Florida or a corporation, such as a registered agent service, authorized to conduct business in the state of Florida. You may elect an individual within the company including yourself.
It is possible to be your own registered agent in Florida. You could also choose to elect a member of your Florida LLC, or even a friend you trust, as long as the person:
- is 18 years or older;
- has a physical address in Florida (not just a P.O. box);
- is always available during normal business hours to receive service of process in person.
However, using a service helps you avoid any fees or further legal trouble caused by missing or misplacing an important document or notice. This can actually save you more time and money in the long run.
Step 3. File the Florida LLC Formation Documents
Articles of Organization in General
Once the name is finalized and the registered Agent is appointed, you can file the Articles of Organization with your state's Secretary of State or appropriate agency.
This simple document is what actually creates your business. The Articles of Organization usually must include the name of the business, its address and other contact information, the identity of the owners, and other basic information about the business.
Articles of Incorporation (Articles of Organization) are typically used when a company wants legal recognition as a business entity. They give business liability protection and reduce its tax rates based on the laws of its particular state, making them an attractive option for many enterprises.
This document is also known as: Certificates of Incorporation, Letters of Incorporation, Corporate Charters, Articles of Organization, Company Articles.
Articles of Organization (Articles of Incorporation) are a set of formal documents that contain the basic information needed to form a Limited Liability Business.
These company formation documents need to answer the following basic questions:
- Who is the incorporator, registered agent, director, and officer?
- What is the purpose of your business?
- Where is the company located and operating?
- When will the company end, if ever?
- How will the company issue stock, and how much is it worth?
Once the Articles of Organization are filed, the company becomes a registered business entity for legal and tax purposes within the state.
Filing Articles of Organization in Florida
At this point, you should determine whether your LLC will be member-managed vs. manager-managed.
There are two main options for filing an Articles of Organization:
Filing Online through the Florida Department of State Sunbiz Website.
Filing by Mail to “New Filing Section Division of Corporations P.O. Box 6327 Tallahassee, FL 32314” - in which case you can download from here.
When it comes to fees, State Filing Cost is $125, payable to the Florida Department of State and it is nonrefundable.
Step 4. Create an Operating Agreement
An operating agreement is an internal legal document that establishes the relations and responsibilities of the members and managers, the ownership structure, and operating procedures.
Many states do not require Operating Agreements, but the formality is highly encouraged since an LLC Agreement distinguishes the company as an LLC rather than a sole proprietorship or partnership.
An LLC Operating Agreement prevents disputes by defining each owner's responsibilities and clarifying how decisions and profits will be distributed internally.
Banks, lenders, investors, and professionals will often ask for an LLC Operating Agreement before allowing a company to open a business checking account, secure financing, receive investment money, or obtain proper legal and tax help.
An Operating Agreement allows you to:
- specify distributive shares (65% ownership entitles you to 65% of profits and losses);
- or make special allocations (50/50 ownership but you are allocated 65% of profits and losses).
For tax purposes, most joint ventures established in the US are formed as LLCs. If you are looking to create your LLC as a joint venture, then you might also need a joint venture agreement.
An LLC Operating Agreement should generally include the following:
- Who owns the company based on the contributed money, property, or time.
- What should happen if one member passes away or wants to leave the company.
- Where the company's principal place of business is located.
- Why only certain individual members can sign contracts on behalf of the company.
- When and how regularly members must meet to discuss company affairs.
- How the profits and losses of the company will be distributed among members.
With all that being said, it is important to know that an operating agreement is not required for an LLC in Florida, but, as it's definitely a good practice to have one.
Although not required, having an operating agreement is recommended by the State of Florida.
According to FL General Statute Chapter 605 Sec. 0105, all members of a Florida LLC may enter into an operating agreement to regulate the internal affairs of the company.
Besides, if you're starting a multi-member LLC, having an operating agreement will prevent misunderstandings among your team by setting clear expectations about each partner's role and responsibilities.
On the other hand, if you're the sole owner of a single-member LLC in Florida, having an operating agreement will help to ensure your limited liability status is upheld by court officials, and add to your business' credibility as a whole.
Step 5. Get an Employer Identification Number (EIN)
EIN stands for Employer Identification Number. EIN is a unique nine-digit number that the Internal Revenue Service (IRS) will assign to a business entity operating in the United States for tax purposes under the Internal Revenue Code and other tax laws, depending on the type of structure being used.
An EIN is used when a business hires employees and is using the number to pay employment taxes.
On top of identifying the tax obligations of a business, the employer identification number must be used to open accounts, to get credit for the business, and possibly to get licenses or permits, depending on the state, the form of the business, and the nature of the business.
An Employer Identification Number (EIN), also known as a Federal Employer Identification Number (FEIN), or Federal Tax Identification Number (FTIN), is like a Social Security number (SSN) for your business.
It's free to apply for an EIN, and the business owners should do it right after you register your business.
Your business needs a federal tax ID number if it does any of the following:
- Pays employees
- Operates as a corporation of partnership
- Files tax returns for employment, excise, or alcohol, tobacco, and firearms
- Withholds taxes on income, other than wages, paid to a non-resident alien
- Uses a Keogh Plan (a tax-deferred pension plan)
- Works with certain types of organizations
Every business owner can apply for an EIN online, or by mail to: Internal Revenue Service, Attn: EIN Operation, Cincinnati, OH 45999 , or by fax: (855) 641-6935.
An application is free of charge, and your nine-digit federal tax ID becomes available immediately upon verification.
Important Steps After Forming an LLC
Open a Business Bank Account
As soon as you start accepting or spending money as your business, you should open a business bank account.
Common business accounts include a checking account, savings account, credit card account, and merchant services account. Merchant services accounts allow you to accept credit and debit card transactions from your customers.
You can open a business bank account once you've gotten your federal EIN.
Most business bank accounts offer perks that don't come with a standard personal bank account:
- Protection. Business banking offers limited personal liability protection by keeping your business funds separate from your personal funds. Merchant services also offer purchase protection for your customers and ensure that their personal information is secure.
- Professionalism. Customers will be able to pay you with credit cards and make checks out to your business instead of directly to you. Plus, you'll be able to authorize employees to handle day-to-day banking tasks on behalf of the business.
- Preparedness. Business banking usually comes with the option for a line of credit for the company. This can be used in the event of an emergency, or if your business needs new equipment.
- Purchasing power. Credit card accounts can help your business make large startup purchases and help establish a credit history for your business.
Get a Business Insurance for Your LLC
Business insurance for Florida Limited Liability Companies protects from the unexpected costs of running a business in Florida. Accidents, natural disasters, and lawsuits could run you out of business if you're not protected with the right insurance.
The protections you get from choosing a business structure like an LLC or a corporation typically only protect your personal property from lawsuits, and even that protection is limited.
Business insurance can fill in the gaps to make sure both your personal assets and your business assets are fully protected from unexpected catastrophes.
In some instances, you might be legally required to purchase certain types of business insurance.
The federal government requires every business with employees to have workers' compensation, unemployment, and disability insurance.
Some states also require additional insurance. Laws requiring insurance vary by state, so visit your state's website to find out the requirements for your business.