Common Limited Liability Company (LLC) Questions
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How long does it take to get an LLC entity set up in Florida?
Depending how quickly the state processes the filings, it will take between two and five business days to set up your LLC entity.
How do I begin the process of incorporating my business?
Articles of Organization must be filed with the State of Florida, together with the required fees.
How do I go about naming the LLC?
The name of your LLC must comply with requirements of the Florida Department of State. Florida Incorporation Service will perform a preliminary name check for you at no additional charge.
The name of your LLC must comply with requirements of the Florida Department of State. We will perform a preliminary name check for you at no additional charge as you form your company to help make sure you meet the following requirements.
As a minimum, keep these points in mind as you select a company name:
- The name cannot be the same as another corporation or LLC on file with the State of Florida.
- The name should not be confusingly similar to that of an existing corporation or LLC, i.e., the name should be distinguishable.
- Adding "The", "and", "&", or any punctuation or pluralization, will not make it unique according to the state. Adding
"of Florida"or a name of a city is also rejected by the State.
- Using words like Services, Group, Management, Enterprise, Associates, International, Property, Properties, Holdings, Marketing, Investments and the like are well used and put you at risk for reject.
- May not contain language implying that the Florida Corporation is connected with a government agency or that the corporation is chartered under United States law.
- You can look up your company name to see if it is available at the Florida Department of State website.
For an LLC, please select a designator for the last part of the name (use either "LLC" or "Limited Liability Company") to identify your company as an LLC.
The name you select may not contain language implying that your company is connected with a government agency or that it is chartered under United States law.
Important Liability Issue for LLCs:
You should make a point of using the correct name of your company, including the "LLC" or "Limited Liability Company" designation at the end of the name, as you conduct your business. Once you form your LLC, keep in mind that omission of the designation in the use of the name shall render any person who knowingly participates in the omission, or knowingly acquiesces in the omission, liable for any indebtedness, damage, or liability caused by the omission (Florida Statutes, Chapter 608.406).
You can look up your company name to see if it is available at the Florida Department of State website.
WHAT ELSE DO I NEED AND WHY?
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What is a business license or occupational license and where do I get one?
- A business or occupational license is issued yearly by the county government. Most but not all counties in Florida require that you register your new business with them.
- The costs depends on the county, the type of business and your company's impact on the county itself.
- Please contact your local county once you have all your corporation documents to find out where you will need to go to get this license.
What is a fictitious name or DBA (Doing Business As) and why would I need one?
- A fictitious name or DBA (Doing Business As) or Trade Name is a name you can register with the Florida Department of State so that you may transact business as another name besides your company name.
- You do not need to file for a fictitious name if you will be conducting business with your company name. You will only need to file for a fictitious name if you will be conducting business as a DIFFERENT name then your LLC name
- For example, you can have a company name ABC, LLC then register a fictitious name Ray's Pizza and then do business as Ray's Pizza in advertising, letterhead, internet names and the like. So the company name remains the same and you will be able to transact business with this fictitious name.
- There are no holds on a fictitious name as it is a
"nickname"or trade name of the company. So other companies can have the same fictitious name as other companies.
- Please review the DBA Common Questions for more information.
What is a Registered Agent and is one needed?
Florida requires that an individual, or service company, be responsible for receiving important legal and tax documents.
This service is provided by an
"agent" of the LLC who is
"registered" within Florida, thus the term
The registered agent for the LLC must have a valid street address within Florida and be available during normal business hours to receive documents. The services performed by a registered agent may include:
- Receiving and forwarding legal documents;
- Receiving and forwarding franchise tax and annual report forms; and,
- Accepting and forwarding service of process.
A Registered Agent must be an adult, residing within Florida and provide a physical address, (no P.O. boxes).
Florida Incorporation Service offers the Registered Agent Service as an additional item, à la carte, if you would like someone other than yourself to be your Registered Agent.
What is an EIN and why do I need one?
An Employer Identification Number (EIN), also known as a federal tax identification number, is a nine-digit number that the IRS assigns to business entities.
- This number is used to identify a business entity and to identify taxpayers that are required to file various business tax returns.
- A business will need to apply for a new EIN if the business is sold or is otherwise transferred.
- You will need an EIN if you have employees in your new business.
- Banks may require an EIN to open an account for most LLC.
What are certificates of ownership and why would I need them for my LLC?
A Certificate of ownership is a printed document used to indicate the percentage ownership in the LLC.
Please note: If you are applying for Workman's Compensation Exemption, you will need to supply a stock certificate to them with your application of exemption.
Florida Incorporation Service offers these in our a la carte as an additional item. There are 10 custom-printed certificates which may be issued at the discretion of the LLC members.
What is a certificate of status and why would I need one?
A Certificate of Status is issued by the Florida Department of State to show that your company is active and has paid the initial filing fees or annual report after the first year.
Some banks and governmental agencies require this certificate as verification that the company is an active Florida company.
If you choose this certificate as part of your package, it is issued electronically by the Florida Department of State and will be emailed to you with your articles.
How do I get a resale certificate or a Florida Tax ID number from the Florida Department of Revenue?
- Please visit the Florida Department of Revenue website or call them at 1-800-352-3671.
LLC STRUCTURE QUESTIONS
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What is a Limited Liability Company (LLC)?
In the early 1980s Florida became the second state to authorize the formation of limited liability companies ("LLCs"). Now more than 100,000 LLCs are formed in Florida annually.
One or more persons may form an LLC. A single-member LLC is allowed in Florida.
What are some of the benefits/advantages and disadvantages of forming an LLC?
- The primary reason for forming a limited liability company is to limit the liability of the owners.
- Interests in LLCs, in addition, are protected from the claims of creditors of their members.
- Organizational changes related to the LLC can generally be made in the operating agreement alone (without amending the articles of organization).
- Managers and managing members are also protected from personal liability regarding claims pertaining to the exercise of their management authority except for more egregious conduct (criminal or reckless acts, deriving improper personal benefits, voting for unlawful distributions, etc.).
- Changes to Florida's corporate income tax laws in the 1990s effectively eliminated the corporate tax for LLCs.
- Generally, an LLC with multiple members is treated for Florida income tax purposes as a partnership (nontaxable entities that act as conduits for transferring income and loss directly to the individual partners) and a single-member LLC is "disregarded" as a separate entity for tax purpose, the same way it is disregarded for federal tax purposes. Thus, most LLCs are not subject to Florida's corporate income tax.
- LLCs are similar to S corporations for federal tax purposes and do not pay tax themselves, but pass their income through to their shareholders.
Selected benefits over a corporation:
- Flexibility: One of the benefits of an LLC over a corporation is the great latitude provided in the drafting of the operating agreement and the flexibility that is possible on such issues as members' contribution obligations, member and management voting powers, profit and loss allocations, governance structure, members' distribution rights, etc. Amendments may be made to the operating agreement as needed.
- A corporation requires that specific formalities be completed on a regular basis, including annual meetings of shareholders and directors each year, meeting minutes which are kept with the corporation's records, etc. It is a good business practice to document major decisions regardless of the structure of your business; however these formalities are not required for LLCs.
- The interest a member owns in an LLC can be protected from creditors while the stock a person has in a corporation may be seized and sold by creditors.
- LLCs can make special allocations of profits and losses among members; S corporations cannot. S corporations have one class of ownership with profits and losses allocated according to the percentage of ownership.
The main disadvantage of the LLC as compared with an S corporation has to do with the tax treatment for profits that are taken out of the business. If yours is a smaller company, you may want to consider the LLC carefully as the disadvantage primarily affects smaller companies.
Here's the situation: With an S corporation, profits taken out of the business (other than salary) are not subject to social security and Medicare taxes (which together amount to 15.3% in 2004)*.
Consider this: In larger companies, where company owners take out salaries of $85,000 or more, plus profits, this situation would not have much of an impact; however, in smaller companies where the owners take out more modest salaries (and then take profits out of the business when available), all the profit taken out of the LLC would be subject to social security and Medicare taxes, where in the S corporation it would not. The result: For a small business where the owner paid themselves a $35,000 salary and took and additional $40,000 in profit out of the business, the extra taxes on the $40,000 would be over $6,000.
* The maximum amount subject to the social security portion for tax years beginning in 2004 has increased to $87,900. All net earnings of at least $400 are subject to the Medicare portion.
Additional LLC Information
A limited liability company may be organized for any lawful purpose, and remains subject to statutes and regulations of the laws of the State of Florida for regulating and controlling its business.
Unless its articles of organization or operating agreement provide otherwise, each limited liability company organized and existing under Florida law shall have the same powers as an individual to do all things necessary to carry out its business and affairs, including, without limitation, the power to:
- Sue and be sued, and defend, in its name.
- Purchase, receive, lease, or otherwise acquire, own, hold, improve, use, and otherwise deal with real or personal property, or any legal or equitable interest in property, wherever located.
- Sell, convey, mortgage, grant a security interest in, lease, exchange, and otherwise encumber or dispose of all or any part of its property.
- Purchase, receive, subscribe for, or otherwise acquire, own, hold, vote, use, sell, mortgage, lend, grant a security interest in, or otherwise dispose of and deal in and with, shares or other interests in or obligations of any other entity.
- Make contracts or guarantees, or incur liabilities; borrow money; issue its notes, bonds, or other obligations, which may be convertible into or include the option to purchase other securities of the limited liability company; or make contracts of guaranty and suretyship which are necessary or convenient to the conduct, promotion, or attainment of the business of a corporation the majority of the outstanding stock of which is owned, directly or indirectly, by the contracting limited liability company; a corporation which owns, directly or indirectly, a majority of the outstanding membership interests of the contracting limited liability company; or a corporation the majority of the outstanding stock of which is owned, directly or indirectly, by a corporation which owns, directly or indirectly, the majority of the outstanding membership interests of the contracting limited liability company, which contracts of guaranty and suretyship shall be deemed to be necessary or convenient to the conduct, promotion, or attainment of the business of the contracting limited liability company; or make other contracts of guaranty and suretyship which are necessary or convenient to the conduct, promotion, or attainment of the business of the contracting limited liability company.
- Lend money, invest or reinvest its funds, and receive and hold real or personal property as security for repayment.
- Conduct its business, locate offices, and exercise the powers granted by this chapter within or without this state.
- Select managers or managing members and appoint officers, directors, employees, and agents of the limited liability company, define their duties, fix their compensation, and lend them money and credit.
- Make donations for the public welfare or for charitable, scientific, or educational purposes.
- Pay pensions and establish pension plans, pension trusts, profit-sharing plans, bonus plans, option plans, and benefit or incentive plans for any or all of its current or former managers, members, officers, agents, and employees.
- Be a promoter, incorporator, shareholder, partner, member, associate, or manager of any corporation, partnership, joint venture, trust, or other entity.
- Make payments or donations or do any other act not inconsistent with law that furthers the business of the limited liability company.
What is the difference between a Member Manager and an External Manager?
An LLC can be run by Members or External Managers.
What is a member?
A member is an owner of the company. An LLC can be run by a member (owner) or several members (owners) of the company. Thus, where a member or several members run the company, the people who own the company also run the company. Most Limited Liability Companies are member managed in this way.
What does it mean to have external managers?
If not managed by its members, you will choose to hire an outside person to run the company who does NOT own a part of the company. This would be termed an "External Manager." You may have one external manager or several external managers.
Where can I find definitions for commonly associated LLC terms?
Authorized Representative – One or more persons acting to form a limited liability company by executing and filing the articles of organization , as authorized by a member of such limited liability company. The authorized representative may, but is not required to be, a member of the limited liability company that is being formed.
Capital Account – The agreed value of the initial contributions, increased by the agreed value of subsequent contributions to capital, if any, and reduced by distributions of capital, unless otherwise provided in the articles of organization or the operating agreement.
Contribution – Any cash, property, or services rendered or a promissory note or other obligation to contribute cash or property or to perform services, which a person contributes to the limited liability company as a member.
Distribution – A direct or indirect transfer of money or other property or incurrence of indebtedness by a limited liability company to or for the benefit of its members in respect of their economic interests.
Foreign limited Liability Company – A limited liability company formed under the laws of any state other than Florida or under the laws of any foreign country or other foreign jurisdiction.
Majority-in-interest of the members means, unless otherwise provided in the articles of organization or operating agreement, members owning more than 50 percent of the then-current percentage or other interest in the profits of the limited liability company.
Manager – A person who is appointed or elected to manage a manager-managed company and, unless otherwise provided in the articles of organization or operating agreement, a manager may be, but need not be, a member of the limited liability company.
Manager-managed company means a limited liability company that is designated to be managed by one or more managers.
Managing member means a member appointed or elected as a managing member of a member-managed company.
Management agreement – If the LLC will be managed by a subset of its members or by someone who is not a member, there should be a management agreement in place which spells out the rights and duties of both the members and managers.
Member – Any person who has been admitted to a limited liability company as a member and has an economic interest in a limited liability company which may, but need not, be represented by a capital account or, in the case of a foreign limited liability company, has been admitted to a limited liability company as a member in accordance with the laws of the state or foreign country or other foreign jurisdiction under which the foreign limited liability company is organized. The member need not reside in Florida. See also Management of a Limited Liability Company.
Membership interest, member's interest, or interest means a member's share of the profits and the losses of the limited liability company, the right to receive distributions of the limited liability company's assets, voting rights, management rights, or any other rights under this chapter or the articles of organization or operating agreement.
THINGS TO KNOW ABOUT LLC's
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What is an Operating Agreement and why would I need one for my LLC?
An operating agreement can contain a writing setting out:
- The amount of cash and a description and statement of the agreed value of any other property or services contributed by each member and which each member has agreed to contribute.
- The times at which or events on the happening of which any additional contributions agreed to be made by each member are to be made.
- Any events upon the happening of which the limited liability company is to be dissolved and its affairs wound up.
It may also contain:
- Members and managers name and responsibilities as well as ownership percentages and signatures.
- Profits, losses, distribution of monies, management, banking resolutions, taxes and other legal agreements regarding internal conflicts as well as general provisions.
- We offer as part of our a la carte service a SAMPLE Operating Agreement. For complete requirements, please obtain a copy of your state's Limited Liability Company legislation. There you will be able to determine the guidelines for your Operating Agreement.
Additional information regarding Limited Liability Company requirements can be located in Florida Statutes, Chapter 608: Limited Liability Companies.
What are Articles of Organization?
- In order to form a limited liability company, articles of organization of a limited liability company must be executed and filed with the Department of State by one or more members or authorized representatives of the limited liability company. The articles of organization shall set forth the following and additional information as required:
- The name of the limited liability company.
- The mailing address and the street address of the principal office of the limited liability company.
- The name and street address of its initial registered agent for service of process in the state.
- The articles of organization are executed by at least one member or the authorized representative of a member.
Note: Articles of organization are filed quickly and efficiently using our online system. Since filings are completed with the Division of Corporations electronically, this cuts the processing time required to form your LLC.
How is an LLC classified for Federal tax purposes?
For Federal tax purposes, an LLC business entity must file as either a corporation, partnership or sole proprietorship.
Federal tax laws will automatically classify and tax certain LLC business entities as corporations. These entities are:
- A business entity formed under a Federal or State statute or under a statute of a federally recognized Indian tribe if the statute describes or refers to the entity as incorporated or as a corporation, body corporate, or body politic.
- An Association under Regulations section 301.7701-3.
- A business entity formed under a Federal or State statute if the statute describes or refers to the entity as a joint stock association.
- A state chartered business entity conducting banking activities if any of its deposits are insured by the FDIC.
- A business entity wholly owned by a state of political subdivision thereof, or a business entity wholly owned by a foreign government or other entity described in Regulations section 1.892.2-T.
- A business entity taxable as a corporation under a provision of the code other than section 7701.(a)(3).
- Certain foreign entities (see Form 8832 instructions).
- An Insurance Company.
If your LLC is not in one of the above categories:
An LLC that is not automatically classified as a corporation can file Form 8832 to elect their business entity classification. A business with at least 2 members can choose to be classified as an association taxable as a corporation or a partnership , and a business entity with a single member can choose to be classified as either an association taxable as a corporation or disregarded as an entity separate from its owner, a â€œdisregarded entityâ€. The Form 8832 is also filed to change the LLC' classification.
What is the effect of Not Electing and Entity Classification, the Default Rules
If an LLC does not File Form 8832, it will be classified, for Federal tax purposes under the default rules. The default rules provide that if the LLC has at least two members and is not required to be classified as a corporation, it will automatically default as a partnership, and be required to file a partnership return. An LLC that has only a single member and is not required to be classified as a corporation will automatically default to the classification of disregarded entity. The disregarded entity files as a sole proprietorship and completes the appropriate schedules as part of the single owners Form 1040.
Note: The above is a summary of tax information from the IRS website and does not present complete information. Please consult an appropriate tax professional if you need clarification or contact the IRS directly for more detail.
Here is the web link to the IRS website for more information on different tax situations. http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Business-Structures
How is an LLC classified for Florida state tax purposes?
A limited liability company that is classified as a corporation for Florida and federal tax purposes is subject to the Florida Income Tax Code and must file a Florida corporate income tax return.
A limited liability company that is classified as a partnership for Florida and federal tax purposes is required to file Form F-1065 if one or more of its owners is a corporation. In addition, the corporate owner of a limited liability company that is classified as a partnership for Florida and federal tax purposes must file a Florida corporate income tax return.
A single member limited liability company that is disregarded for Florida and federal tax purposes is not required to file a separate Florida corporate income tax return. However, the income of the company is not exempt from tax if it is owned by a corporation, whether directly or indirectly. In this case, the corporation is required to file Form F-1120 reporting its own income, together with the income of the single member limited liability company.
Source: Fl Dept Revenue
Do I need an attorney or CPA to form an LLC?
No. An attorney or CPA is not legally required to form an LLC.
What are the business activities I can choose for my LLC?
These are broad categories that the IRS provides to help you select what type of company you are creating. If your company does not fall into any of these categories choose â€œotherâ€ then tell us specifically what you will be doing in the blank next to â€œother.â€
Accommodation & food services – providing customers with lodging, meal preparation, snacks, or beverages for immediate consumption.
Construction – erecting buildings or other structures, (e.g., streets, highways, bridges, tunnels). The term â€œconstructionâ€ also includes special trade contractors (e.g., plumbing, HVAC, electrical, carpentry, concrete, excavation, etc.)
Finance & insurance – in transactions involving the creation, liquidation, or change of ownership of financial assets and/or facilitating such financial transactions; underwriting annuities/insurance policies; facilitating such underwriting by selling insurance policies; or by providing other insurance or employee-benefit related services.
Health care and social assistance – providing physical, medical, or psychiatric care using licensed health care professionals or providing social assistance activities such as youth centers, adoption agencies, individual/family services, temporary shelters, etc.
Manufacturing – the mechanical, physical, or chemical transformation of materials, substances, or components into new products. The assembling of component parts of manufactured products is also considered to be manufacturing.
Real estate – renting or leasing real estate to others; managing, selling, buying or renting real estate for others; or providing related real estate services (e.g., appraisal services).
Rental and leasing – providing tangible goods such as autos, computers, consumer goods, or industrial machinery and equipment to customers in return for a periodic rental or lease payment.
Retail – selling merchandise to the general public from a fixed store; by direct, mail-order, or electronic sales; or by using vending machines.
Transportation & warehousing – transportation of passengers or cargo; warehousing or storage of goods; scenic or sight-seeing transportation; or support activities related to these modes of transportation.
Wholesale-agent/broker – arranging for the purchase or sale of goods owned by others or purchasing goods on a commission basis for goods traded in the wholesale market, usually between businesses.
Wholesale-other – selling goods in the wholesale market generally to other businesses for resale on their own account.
Other – activity not described above. Describe the applicant's principal business activity in the space provided.
What are the different types of employees?
Applies to most employees. Most new companies will designate their employees in the "Other" category.
Employee who performs household services, such as a maid, babysitter, gardener, or cook, in your home are not subject to social security and Medicare taxes if you pay that employee cash wages of less than $1,400.
In general, you are an employer of farm workers if your employees:
- Raise or harvest agricultural or horticultural products on your farm,
- Work in connection with the operation, management, conservation, improvement, or maintenance of your farm and its tools and equipment,
- Handle, process, or package any agricultural or horticultural commodity if you produced over half of the commodity (for a group of up to 20 unincorporated operators, all of the commodity),
- Or do work for you related to cotton ginning, turpentine, or gum resin products.
What is the difference between a principal address and a mailing address for an LLC?
The principal address is the physical location in Florida where the company conducts business. Florida Department of State Division of Corporations mandates that this be a physical Florida address. A P.O. Box number cannot be used for this address.
The Mailing address for an LLC can be a P.O. Box and does not have to be in Florida. What the Florida Department of State does require of this address is that this be a current and good address where you can be reached at any time.
Can I change the principal and mailing address of my corporation after I have filed?
Yes, you can update both of these addresses by emailing the Florida Department of State Division of Corporations at email@example.com.
The principal address will still have to be a physical Florida address.
You can also update the officer and director after your initial filing.
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