How to Start a Business in Florida
If you’re considering starting a business and you’re flexible on the location, Florida may be a great state to think about.
The state has no individual income tax and low filing fees. Florida, according to the latest data from the U.S. Small Business Administration Office of Advocacy, is home to 2.5 million small businesses that employ 3.4 million people.
Running a successful business can be difficult, but starting one in Florida can often be relatively straightforward. You’ll need to establish a business entity, register for an Employer Identification Number (EIN) and obtain the necessary business licenses, among other things. We’ll talk you through the steps involved.
- How to establish a business entity in Florida
- Costs of starting a business in Florida
- The bottom line
How to establish a business entity in Florida
When you’re ready to start a business in Florida, you need to tackle a few legal requirements before you take on paying clients or sell goods. Let’s take a look at the key steps involved.
Select your entity type
Before you can file for a business license, you must choose the type of business entity you want to establish. You have the following options:
- Sole proprietorship : This is the simplest option, allowing you to start an unincorporated business. There is no legal separation between the owner and the entity, so there is little legal protection. Freelancers and independent contractors often use this structure.
- Limited liability company: An LLC offers limited personal liability, providing some protection to the owner of the company; notably, however, an LLC doesn’t require shareholders, management meetings or certain corporate formalities. LLC can be formed by one or more people; depending on their composition, LLCs can be taxed as a corporation, partnership or a pass-through entity, meaning the business isn’t subject to corporate income tax. It can instead allocate shares of profits under the business owner’s individual income tax.
- Corporation : A corporation is an independent legal entity that is separate from those who own and manage it, meaning it doesn’t dissolve when owners die. The owners have limited liability, but the corporation will pay its own taxes and transact business as its own entity.
- Nonprofit corporation: A nonprofit must list its intended purpose on its business application, such as “church ministry” or “care of animals.” Specific language will be required if you want to pursue 501(c)(3) tax-exempt status from the IRS, so check the requirements before you file.
- Partnership : A partnership involves two or more people who co-own a business. Each will contribute something — such as financial investments, experience or property — and both will share profits and losses.
- With a general partnership, the responsibilities, rights and profits are shared equally among partners. Partners are able to act on behalf of the others, and each partner is responsible for their share in any obligations or debts the business accrues.
- A limited partnership allows each individual partner to limit their personal stake and liability in the company. There is at least one general partner who has the right to manage the business, while limited partners do not. They aren’t, therefore, responsible for the business’ debts or obligations.
File for a business license
When you know the type of business entity you want to create, you’ll file for a business license. This will establish the entity legally. You’ll file through Sunbiz, an organization run by the Florida Department of State that manages all business registration and licensing.
To file your application, you’ll need to do the following:
- Choose an entity structure
- Select a business name
- Designate a primary mailing address
- Identify the owner(s) and any agents of the company
Most of this information can be changed later by updating your business license. If you need to have the business license and tax information before you book an office space, for example, you can always list a business mailbox or your home address for now.
You can make changes when you file your annual report or via email if the report has been filed or isn’t due. It will cost you $25 to $35 to change the registered agent’s address or the registered office address, but changing EINs, email addresses or mailing addresses do not require fees.
Select a business name
You’ll be required to choose a legal or fictitious name for your business.
Legal names are what will appear on the business license, which may include the owner’s first and last name. The branded name of the business, however, may be different. This could be the case if the legal name the business owner wanted was already taken or if they want to brand themselves differently.
Fictitious names are also known as “doing business as” or “dba.” They’re required in Florida if you’re operating a sole proprietorship under a name that’s different from your personal name or if the fictitious name of your business is different from the legal name. You can register for a DBA here.
Obtain additional licenses if needed
Some industries and locations will require additional licensing for you to start operations, so it’s important to understand what’s required of your new business upfront.
Restaurants, for example, will need a liquor license if they want to offer cocktails, while real estate brokers and associates need licenses to work.
The state Department of Business and Professional Regulation licenses and regulates businesses in Florida; you can find the list of industries here. You may instead need to be licensed by the state Department of Agriculture and Consumer Services; see its full list here.
Some cities and counties may require certain permits or licenses even if the state doesn’t, including alarm, health, tax or signage permits. Check with your city and county for the latest information.
Register for an Employer Identification Number
After you have your business license, you can register online for an EIN with the IRS. It acts like your business’ Social Security number, preventing you from needing to add your Social Security number if you’re ever working as an independent contractor submitting a W-9.
If you apply online, you’ll get an EIN immediately. Just make sure that you have your business’ document number — which comes after you register with Sunbiz — so that you can connect your EIN with your business.
Set up a business bank account
Before you start taking clients or processing payments, set up a business bank account. This will be connected to your EIN, and it’s important even for pass-through entities. It will make it much easier to keep your business and personal finances separate — and it’s often easier to set aside money for taxes accordingly.
Many financial organizations offer business bank accounts, including small credit unions. It will be important to choose an account that comes with features that align with your business’ needs. If you know that you’ll be sending or accepting a large number of wire transfers, for example, you’ll want to find a business account with low incoming and outgoing fees. Look at factors such as monthly maintenance charges and transaction fees, as well as potential perks, such as credit cards that come with higher cashback percentages.
Costs of starting a business in Florida
Besides the paperwork and planning involved, starting a business in Florida comes with inevitable costs.
To file for corporation status, you’ll pay $35 for filing fees and $35 for a registered agent designation. For a certificate of status or a certified copy of the business license, you would pay $8.75 (the state considers this optional). After the first year, you’ll need to file annual reports for your corporation, which cost $61.25 for nonprofits and $150 for-profits. If the annual report for your for-profit is received after May 1, the cost rises to $550.
To file for an LLC in 2019, you’ll pay $100 in filing fees and $25 for registered agent designation. You can pay $30 for a certified copy or $5 for a certificate of status. The annual report fee costs $138.75, but it jumps to $538.75 if sent after May 1.
Additional licenses and fees also typically have associated costs to obtain and maintain them. These vary in cost depending on the specific license or permit that you need.
State taxes and federal taxes will be something to consider, too; state taxes are noteworthy, since corporate entities often need to file corporate income tax returns. Depending on what products and services you offer, you may need to charge customers a sales tax on their purchases.
It’s often a good choice to carry business-related insurance, even if it’s not required for your industry. These include general liability insurance, property insurance, professional liabilities insurance, cyber liability insurance and workers’ compensation insurance.
Most insurance is optional in Florida, but there are two types that are required if you meet the criteria. Businesses with at least four employees (or construction businesses with at least one) must have workers’ compensation insurance. Separately, all businesses in which a vehicle is used, leased or operated for business purposes must have a commercial vehicle policy.
Many business owners will look for an office space, whether it’s a full office or even just a desk in a coworking space. This can cut into your profit, especially early on, and is one of the most common reasons that new businesses will take out a loan to get started.
With so many upfront costs required to start a business, it’s easy to see why so many potential owners are interested in (and even rely heavily on) funding. There are different financing options available, including:
- SBA grants, which give recipients funding outright instead of loaning it to them, requiring no payback
- SBA loans, which generally have competitive terms and may require a lower down payment
- Visit Florida grants, which offers specialized grants to businesses falling under certain industries within Florida; options include those for advertising agencies, tourism businesses and businesses still affected by Hurricane Michael
- Amber Grant, which is available for women starting a small business in Florida
To get a traditional business loan, businesses are often required to have been in operation for a year or two while showing profitability. Their owners also typically need to have certain personal credit scores.
You can choose from short-term business loans or long-term loans. Short-term loans can often have a fast approval process and may work for business owners with lower credit scores. Long-term loans, on the other hand, have fixed interest rates that are often lower than other options.
It’s also common for owners to open a business line of credit, which gives you a fixed amount of credit that you can access as needed. Since interest is only applied to the drawn amount, this is a good, flexible long-term option.
The bottom line
Starting a new business is an exciting time, but it can also feel a little intimidating. There are a lot of choices to be made. There is plenty of paperwork to be filed and fees to be paid before you can start making a profit. Fortunately, the process of legally starting a business is a relatively simple one in Florida, especially if you know what to expect. The ability to obtain a business license within a few weeks and then an EIN and a business account only a day after that makes starting a small business quick work — at least on paper.
If you’re not sure exactly which path to take, consider reaching out to a business lawyer or a qualified certified public accountant (CPA). Finding a CPA with experience working with small businesses can be a good place to start — the Florida Institute of CPAs provides a database. They’ll be able to help you assess what business structures will benefit you most, what legal considerations you should take and offer advice on insurance, contracts and more. Running a business can be complicated, after all, but it’s much easier with the right team and resources supporting you.