Key Takeaways

  • A Florida profit corporation operates as a separate legal entity from its owners, providing limited liability protection.
  • Key advantages include ease of raising capital, perpetual existence, and potential tax benefits.
  • Disadvantages include higher costs, corporate formalities, and more regulatory requirements.
  • Florida corporations must file Articles of Incorporation, designate a registered agent, and file annual reports.
  • Florida imposes a corporate income/franchise tax on corporations operating in the state.
  • Corporations must comply with beneficial ownership reporting requirements effective 2024.
  • The corporate structure differs from an LLC in ownership, taxation, and governance flexibility.

A Florida profit corporation is a corporation that is established for the purpose of making a profit. Most corporations, unless they are formed as a nonprofit corporation, are established for the sole purpose of making a profit. Particularly, the Florida corporation operates as a separate and distinct legal entity from its shareholders, who are also the owners of the company. This means that the shareholders cannot be held personally liable for the debts of the business.

Advantages

There are many advantages to operating a Florida corporation; some of the advantages include:

  • Limited liability protection
  • Unlimited existence
  • Tax benefits
  • Ease of ownership transfer
  • Easier to raise money than other business structures

Similar to that of an LLC, the corporate business structure offers limited liability protection for its owners. While there are some exceptions to this rule, which are referred to as instances of piercing the corporate veil, most often, creditors cannot use the owners’ personal assets to satisfy the business debts.

Some examples of piercing the corporate veil might include if the owner engaged in fraudulent or otherwise illegal activity, if the owner personally guarantees a loan, or if an owner holds himself out to be an extension of the corporation.

Corporations have an unlimited existence, as the death or illness of an owner will not cause dissolution of the business. Furthermore, a sale of shares will not cause the business to automatically terminate.

There are several tax benefits to a corporation, including insurance and retirement deductions.

It is rather easy and straightforward for one owner to sell shares of stock to another, without having to fill out any complex paperwork.

It is easier for a corporation to raise capital through selling shares and bonds. Unlike the corporation, other business structures, such as the LLC and partnership, cannot sell shares.

Steps to Form a Florida Profit Corporation

To form a Florida profit corporation, you must complete several key steps:

  1. Choose a Unique Name: The name must be distinguishable from other entities registered in Florida. You can search name availability through the SunBiz website.
  2. Designate a Registered Agent: The corporation must have a registered agent with a physical Florida address to receive legal documents.
  3. File Articles of Incorporation: Submit the Articles of Incorporation to the Florida Department of State, either online or by mail. This document includes the corporation's name, principal address, registered agent, and incorporator details.
  4. Pay the Filing Fee: The standard filing fee is required at the time of submission. Expedited processing options may be available for additional fees.
  5. Obtain an EIN: Apply for an Employer Identification Number (EIN) from the IRS for tax purposes.
  6. Draft Corporate Bylaws: Although not filed with the state, bylaws govern internal management and are critical for corporate operations.
  7. Hold Organizational Meeting: The board of directors should hold an initial meeting to adopt bylaws, appoint officers, and handle initial business.
  8. Issue Stock Certificates: Document initial ownership by issuing stock certificates to shareholders.
  9. File the Annual Report: Florida profit corporations must file an annual report with the Division of Corporations by May 1 each year to maintain active status.

Disadvantages

While there are several advantages to operating a corporation in the state of Florida, there are some disadvantages to the corporate business structure as follows:

  • It costs more to form a corporation than a partnership, sole proprietorship, or LLC.
  • There are additional corporate formalities required for corporations.
  • There are greater state and federal regulations for corporations.

Corporate Tax Obligations in Florida

Florida imposes a corporate income/franchise tax on profit corporations for the privilege of conducting business in the state. Key details include:

  • The tax applies to corporations earning income or existing within Florida.
  • Corporate federal income is adjusted by Florida-specific additions, subtractions, and apportionments to calculate taxable income in Florida.
  • The tax rate is typically 5.5% of Florida taxable income (subject to legislative changes).
  • Corporations must file Form F-1120 (Florida Corporate Income/Franchise Tax Return) annually.
  • Corporations with certain criteria (e.g., net income of $45,000 or less, no adjustments) may file a short-form return, Form F-1120A.
  • Electronic filing is required for corporations that meet federal e-filing requirements or paid $5,000 or more in state tax in the previous fiscal year.

Failure to file may result in penalties and loss of good standing with the state.

LLC vs. For Profit Corporation

There are both similarities and differences between the LLC and corporate business structure. As previously noted, both businesses provide limited liability protection for the owners and shareholders. Furthermore, both types of businesses operate as separate legal entities from its owners, thereby allowing for the liability protection.

Both the LLC and corporation must file a formal document registering the business with the Florida Secretary of State. Either articles of incorporation (corporation) or articles of organization (LLC) will be filled out and submitted, along with the applicable application fee.

One key difference between the LLC and corporation is the ownership structure. While LLCs have greater flexibility in terms of how the owners can oversee and manage the business, the corporate ownership structure requires the shareholders to hire a board of directors who will manage the significant business decisions. In turn, the board will hire officers who will have daily oversight over the company.

LLC owners can be individuals, corporations, LLCs, or other foreign businesses. Furthermore, LLCs can have an unlimited number of owners. Corporations, however, have some restrictions. C Corporations allow corporations, non-resident aliens, and LLCs to act as shareholders. S corporations, however, only allow a total of 100 shareholders; and such shareholders must be U.S. residents.

LLCs can choose to operate as either member-managed or manager-managed. A member-managed LLC means that the members (owners) will oversee the business whereas a manager-managed LLC means that the owners will hire a third-party manager to oversee the business.

LLCs and S corporations operate as pass-through taxation entities, meaning that these business structures don’t pay business taxes. Rather, the profits and losses pass through to the owners who will report it on their personal income tax returns. C corporations incur double taxation – once at the corporate level and again at the personal level.

When it comes to issuing stock, LLCs don’t have an ability to issue any stock. C corporations can offer as much stock in as many classes of stock as the company wishes. However, the S corporation can only issue one class of stock.

Reporting Requirements for Florida Profit Corporations

All Florida profit corporations must meet ongoing compliance requirements:

  • Annual Report Filing: Corporations must file an annual report with the Division of Corporations to update ownership and contact information by May 1 each year. A late fee applies after this deadline.
  • Registered Agent Maintenance: The registered agent’s information must be kept current; failure to maintain a registered agent can lead to administrative dissolution.
  • Beneficial Ownership Reporting: Beginning January 1, 2024, corporations must comply with federal beneficial ownership reporting requirements under the Corporate Transparency Act. Although reported federally, Florida provides notification about this obligation.
  • Corporate Records: Corporations must maintain corporate records such as meeting minutes, bylaws, and shareholder lists at their principal office.

These requirements ensure the corporation maintains legal compliance and good standing in Florida.

Frequently Asked Questions

  1. What is the filing fee to start a Florida profit corporation?
    The filing fee is $70, which includes the filing of Articles of Incorporation and designation of a registered agent.
  2. What happens if I don’t file the annual report on time?
    A late fee of $400 is assessed, and failure to file can lead to administrative dissolution of the corporation.
  3. Do I need to file Florida corporate taxes if my corporation had no income?
    Yes, all Florida profit corporations must file an annual corporate tax return, even if no income was earned.
  4. Can I be my own registered agent for my Florida profit corporation?
    Yes, as long as you have a physical Florida address and are available during business hours.
  5. How long does it take to form a Florida profit corporation?
    Online filings are usually processed within 1–2 business days, while mail filings may take up to 5–7 business days.

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