Florida Entity Notes: Annual Report Deadline, Corporate Income Tax, and Sales Tax

Florida is popular with owners relocating for lifestyle and tax reasons. As with any state, the details reward attention. This is a general overview for education. Confirm current rules with the Florida Division of Corporations and the Department of Revenue.

No personal income tax

Florida does not tax individuals' wages or business income at the state level. That means pass-through business income, such as income from an LLC taxed as a disregarded entity, partnership, or S-corp, generally is not subject to a Florida individual income tax for Florida residents. Non-Florida income sources can still be taxed by other states. See state income tax and remote employees.

Corporate income tax

Florida does impose a corporate income tax on C-corporations and other entities taxed as corporations for federal purposes. S-corporations are generally exempt from Florida corporate income tax except to the extent of income that is subject to federal tax at the entity level (such as built-in gains). LLCs taxed as partnerships or disregarded entities typically owe no Florida corporate income tax. Florida requires S-corps to file a state return in some circumstances even where no tax is owed, so check the requirements. Note that Florida's corporate income tax makes the choice between S-corp and C-corp treatment more consequential than it is in states with no corporate tax.

Annual report

Florida requires most LLCs and corporations to file an annual report with the Division of Corporations every year, within a window that begins on January 1 and ends on May 1. Filing after May 1 results in a late fee, which is substantial and cannot be waived. An entity that does not file may be administratively dissolved (for corporations) or revoked (for LLCs), typically after a period of continued non-compliance, on a schedule the state publishes. Reinstatement requires filing and paying fees. See annual reports and franchise taxes.

The annual report requires the entity's principal address, registered agent, and information about certain managers, members, or officers.

Formation basics

• Florida LLCs are formed by filing Articles of Organization with the Division of Corporations. A registered agent with a Florida street address is required.
• Florida law provides a fairly flexible LLC framework, and many owners use LLCs for real estate and operating businesses.
• Foreign entities doing business in Florida register with the Division. See foreign qualification basics.
• Fictitious name registration is required for operating under a name other than the entity's legal name. See DBA and trade names.

Sales and use tax

Florida has a state sales and use tax, with county discretionary surtaxes that vary by location. Most retail sales of goods are taxable, and certain services are as well. Florida has been one of the few states to tax commercial rent (the tax on the rental of commercial real property), though legislative changes have reduced or repealed this in recent periods. Check the current status before signing leases or setting rent between related entities. Sellers register with the Department of Revenue for a certificate of registration, and must remit collected tax on the schedule assigned. See sales tax nexus basics and owning your building in a separate LLC.

Reemployment tax

Employers pay reemployment assistance tax (Florida's unemployment insurance tax). Register with the state for an account once you have employees, and file quarterly returns. The tax rate depends on the employer's experience and the wage base.

Real estate

Florida has documentary stamp taxes on deeds and on mortgages and notes, which are relevant when you transfer real estate to an LLC or refinance. Transfers into an LLC can trigger doc stamp tax in some circumstances, especially when the property is subject to a mortgage. Homestead protections and property tax rules also interact with holding property in entities. Get legal advice before retitling. See real estate in an LLC or personal name.

Owners who move to Florida

Business owners who relocate to Florida must respect the tax rules of their former state, which may continue to tax income earned there, and may challenge a claimed change of domicile. If your business or customers remain in a state with an income tax, you may owe that state's tax as a nonresident. Document your move with a consistent pattern: driver's license, voter registration, homestead filing, time spent, and location of primary home. Discuss with a tax professional before making the move.

Common Florida pitfalls

1. Missing the May 1 annual report deadline, which brings the late fee.
2. Assuming no state tax on any business income when an S-corp or LLC operates as a C-corp.
3. Forgetting fictitious name registration.
4. Overlooking sales tax registration for taxable sales.
5. Retitling real estate into an LLC without considering doc stamps and lender consent.
6. Assuming a Florida address removes other states' tax claims.

First-year checklist

1. File Articles of Organization and confirm the registered agent.
2. Obtain an EIN.
3. Register with the Department of Revenue for sales tax and reemployment tax if applicable.
4. Obtain local business tax receipts from your county or city.
5. Adopt an operating agreement.
6. Set a January to May annual report reminder.

For a review of entity choice and multi-state exposure when relocating, AE Tax Advisors can help, and a discovery call is a simple first step.