Florida LLC Tax Return: Everything You Need to Know
Your Florida LLC tax return is what you have to file in Florida in order to pay your state business taxes. One of the biggest advantages of running a small business in Florida is that you will pay less in business taxes than in perhaps any other state in the country. 3 min read
Florida Taxes for Small Businesses
Your Florida LLC tax return is what you have to file in Florida in order to pay your state business taxes. One of the biggest advantages of running a small business in Florida is that you will pay less in business taxes than in perhaps any other state in the country. This is due to Florida only levying taxes against C corporations, while most small businesses are LLCs, S corporations, sole proprietorships, or partnerships. So, if you’re not running a C corporation, you won’t have to pay the state income tax in Florida. Furthermore, Florida citizens do not have to pay state income taxes, so if you are a small business owner, you will not be taxed on pass-through income.
If you are running a C corporation, you will still enjoy taxes that are low in comparison to most other states. Some essential details pertaining to a C corporation’s tax situation are as follows:
- Florida’s standard corporate tax on federal taxable income is 5.5%, but exemptions could make it significantly lower.
- Florida C corporations must either pay the standard rate with all credits and exemptions subtracted or the alternate minimum tax (AMT) of 3.3%, whichever is higher.
- In 2015, using either method, the first $50,000 of income was exempt from Florida corporate tax.
- In time, C corporations that have paid AMT are given a carryover tax credit.
Other Entities Subject to Corporate Tax
Aside from C corporations, the following business entities must file the Florida corporate tax:
- All savings associations or banks.
- All artificial entities or associations in Florida.
- All foreign corporations that are members or partners in a Florida joint venture or partnership.
- Any political organization that files Federal Form 1120-POL.
- Any tax-exempt organization that has “unrelated trade or business income.”
Additionally, condo and homeowner associations that file Federal Form 1120 are required to file Form F-1120 or Form F-1120A even if no tax is due. If Federal Form 1120-H is filed, no Florida return is necessary.
Many small business owners elect to have their companies taxed as S corporations because in Florida, this means both the LLC and its owner(s) will not have to pay any state income tax. Additionally, S corporations are not required to pay federal income tax, although this tax does pass through to the S corp’s owners, who then pay it at ordinary income tax rates.
There are many forms of business partnerships, including limited partnerships, limited liability partnerships, and general partnerships. Regardless of their form, none must pay Florida state income tax.
Partnership income gets paid directly to the business partners, who pay federal income tax on it at ordinary income tax rates just as they would on income from a contract job. However, because no state tax for ordinary income is imposed by Florida, LLC owners in Florida who have classified their companies as partnerships do not have to pay any state income tax.
Sole proprietorships function similar to partnerships, only with them, the business income goes to the one owner of the business, rather than it being dispersed to multiple partners. Such income is regarded as regular personal income for federal tax purposes, and as such, the business owner must pay federal tax for it at the ordinary income tax rate.
Income distributed by sole proprietorships is considered ordinary personal income by the State of Florida, and such income is not taxed. Also, since the business is not a corporation, state income tax does not apply, so the owner does not have to pay state taxes.
Sometimes, small business owners who have LLCs in Florida but undertake significant business outside the state are required to pay taxes in other states on any income earned by their businesses there. In such situations, the LLC is referred to as having nexus, or a sufficient physical presence, with those states. Such distinctions may sometimes seem hard to determine, and thus small business owners who could potentially be in that situation are advised to educate themselves on the nexus rules as much as they can and how they might apply to their business.
If you need help understanding the Florida LLC tax return, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.