Key Takeaways

  • Setting up an S corporation in Florida involves first forming a corporation or LLC with the Florida Division of Corporations, then filing Form 2553 with the IRS to elect S corp status.
  • Florida S corporations enjoy no state income tax on corporate earnings, but still face federal payroll, unemployment, and shareholder income taxes.
  • Annual reports must be filed with the Florida Division of Corporations by May 1, with a $150 filing fee.
  • Businesses may still owe sales tax, excise tax, and reemployment (unemployment) tax depending on their activities.
  • Proper compliance with IRS reasonable compensation rules, shareholder limits, and documentation requirements is essential to maintain S corp status.

Florida S corporation taxes include federal payroll taxes and federal unemployment tax. Shareholders of Florida S corporations are required to pay federal personal income tax, and some of them might qualify for net investment income tax. In the state of Florida, both the S corporation and its shareholders are exempt from state income taxes. The S corporation might still need to pay state sales tax and excise tax.

Federal Taxes That Florida S Corporations Must Pay

Florida S corporations, like all S corporations in the U.S., are not subject to federal corporate tax. This is because they are flow-through entities. However, depending on its structure and line of business, an S corporation might be called upon to pay the following taxes:

  • Payroll Taxes
    These taxes include Medicare and Social Security taxes. They were established by the FICA Act and they are typically equal to about 15.3 percent of an employee's wages. The S corporation must withhold about half of this amount from the employee and contribute the other half.
  • FUTA Tax
    Federal Unemployment Tax Act (FUTA) tax is levied on corporations that spend at least $1,500 on wages in any quarter or hire at least one employee for part of a day for 20 weeks or more in any quarter. For S corporations that have farmworkers, if they spend $20,000 on farmworker wages in any quarter or hire 10 workers for part of a day for at least 20 weeks in any quarter, they are eligible. The rate for this tax is about 6 percent of the wages, but the S corporation can get deductions for any money it has contributed to a Florida unemployment fund.
  • Personal Income Tax
    Florida S corporation shareholders are required to pay income tax for their share of the earnings from the corporation. They must pay these taxes even if the earnings were not actually distributed in a certain year. The rates range from 10 percent to 37 percent depending on the income of the shareholder.
  • Net Investment Tax
    Nonactive shareholders who earn at least $200,000 individually, or $250,000 if they file jointly as a couple, are subject to the Net Investment Income tax. 

Steps to Form an S Corporation in Florida

To understand how to set up an S corp in Florida, you first need to form a legal business entity with the state. An S corporation is a tax classification, not a separate legal structure. Follow these steps to properly establish your Florida S corp:

  1. Choose a Business Name
    • Verify your name’s availability using the Florida Division of Corporations’ Sunbiz portal.
    • The name must include “Corporation,” “Incorporated,” or an abbreviation like “Inc.” and be distinguishable from existing entities.
  2. File Articles of Incorporation
    • File with the Florida Division of Corporations and pay the $70 filing fee ($35 for the articles and $35 for a registered agent designation).
    • Provide details like your business name, principal address, and the name and address of your registered agent.
  3. Appoint a Registered Agent
    • Every Florida S corp must have a registered agent residing in the state or a Florida-based business authorized to serve as one. The agent receives legal and tax correspondence on behalf of the company.
  4. Create Corporate Bylaws and Hold an Organizational Meeting
    • Bylaws outline how the corporation will operate, including officer duties, meeting rules, and voting rights.
    • Record meeting minutes and document the election of initial directors and officers.
  5. Obtain an Employer Identification Number (EIN)
    • Apply for an EIN from the IRS. This number is required for opening business bank accounts, hiring employees, and filing taxes.
  6. Elect S Corporation Status
    • File IRS Form 2553 (Election by a Small Business Corporation) within 75 days of incorporation or the start of the tax year.
    • If missed, businesses may apply for late election relief by explaining reasonable cause to the IRS.
  7. Register for State Taxes and Licenses
    • Although Florida doesn’t tax S corp income, you may need to register for sales tax, reemployment tax, or industry-specific permits depending on your business type.
  8. File Annual Reports
    • Submit your annual report by May 1 each year to maintain “active” status and avoid the $400 late penalty.

Following these steps ensures compliance with both Florida state and federal tax laws for your S corporation.

Additional Federal Filing Requirements for Florida S Corps

While Florida S corporations avoid double taxation, they must still adhere to federal filing obligations. Each S corp must file Form 1120-S with the IRS annually, which reports income, deductions, and credits. Shareholders receive a Schedule K-1, detailing their individual share of income and losses, which must be reported on their personal returns.

S corporations must also ensure compliance with reasonable compensation rules — paying shareholder-employees fair market wages before issuing distributions. The IRS closely monitors this to prevent tax evasion through misclassification of income. Failure to meet this standard can result in penalties or reclassification as a C corporation.

If a Florida S corp has non-resident shareholders, it must withhold federal income taxes on distributions paid to them, ensuring compliance with federal reporting rules for out-of-state or foreign investors.

Florida S Corporation Taxes: State Taxes

S corporations that have just filed for S corporation treatment must file the Informational part of the F-1120, the Florida Corporate Income/Franchise Tax Return, in the first year after filing for S corporation treatment. In subsequent years, the S corporation does not need to file this return. Florida S corporations do not pay the 5.5 percent corporate tax that is levied on C corporations.There are a few rare scenarios that would necessitate a Florida S corporation to file returns with the state. This could happen if the corporation has a taxable income. Such scenarios play out when the following occurs:

  • The corporation has shareholders with excess net passive income.
  • The corporation used LIFO method for valuing its inventory before it filed as an S corporation. It is then liable for a recapture.
  • The corporation made gains under Schedule D of Form 1120S.

The state of Florida does not levy personal income taxes on shareholders of an S corporation. Florida is one of the few U.S. states that do not charge any income tax on the S corporations or their shareholders. This has made the S corporation an especially popular entity type with small business owners in Florida.

Of course, if the Florida S corporation also conducts business in other states, it might be required to pay taxes in those states. Florida S corporation owners whose corporation does business in other states need to consult with tax lawyers in the other states to avoid surprises.

Florida Filing and Compliance Requirements

Florida S corporations are exempt from paying the state’s corporate income tax, but they still need to maintain active status through annual reporting. All corporations — including S corps — must file an Annual Report with the Florida Department of State, Division of Corporations, by May 1 each year. The current filing fee is $150, and missing the deadline incurs a $400 late fee.

Even though Florida S corporations are not taxed at the entity level, they may have to file Form F-1120A (Informational Return) in specific cases where federal income flows through to shareholders or when the S corp holds passive income exceeding 25% of its gross receipts.

If your Florida S corp conducts business in other states, you might need to file foreign qualification paperwork and pay taxes where the business maintains a nexus (a sufficient physical or economic presence). States like Georgia or New York, for instance, impose corporate or franchise taxes even if your company is incorporated in Florida.

Ongoing S Corporation Maintenance and IRS Compliance

Once you have successfully elected S corp status, maintaining compliance is key to keeping your tax benefits. The IRS imposes strict criteria to remain classified as an S corporation:

  • Shareholder Limits: You can have no more than 100 shareholders, and all must be U.S. citizens or resident aliens.
  • One Class of Stock: S corps can issue only one class of stock, ensuring all shareholders have equal rights to distributions.
  • Reasonable Compensation: Shareholder-employees must receive fair market wages before taking profit distributions. The IRS closely monitors this to prevent underpayment of employment taxes.
  • Timely Tax Filings: File Form 1120-S annually, and issue Schedule K-1s to shareholders reflecting their share of income or loss.
  • Corporate Recordkeeping: Keep detailed records of meetings, shareholder agreements, and payroll documentation to demonstrate compliance in case of audit.

Florida also requires corporations to keep their registered agent active and update Sunbiz filings for any structural changes. Failure to comply may lead to administrative dissolution or loss of S corp status.

State Taxes a Florida S corporation Might Need to Pay

In addition to fees for business permits or licenses, a Florida S corporation might need to pay the following taxes:

  • Sales tax
  • Excise tax
  • Unemployment insurance
  • Workers' compensation insurance

Florida S corporations do not pay federal corporate tax. The corporations might be eligible to pay FICA and FUTA taxes. Florida S corporation shareholders also qualify for federal personal income taxes. High-earning inactive shareholders might qualify for net investment income tax. The state of Florida is very lenient with S corporations on taxes and does not require S corporations to pay corporate tax. Neither does the state levy any personal income taxes on S corporation shareholders.

Local Taxes and Industry-Specific Considerations

Even though Florida has no state income tax, some local or industry-specific taxes still apply. Depending on the business type and county, an S corporation might need to pay:

  • County Business Taxes – Local governments in Florida often impose annual business tax receipts for companies operating within their jurisdictions.
  • Sales and Use Taxes – S corps selling tangible goods or certain services must collect and remit 6% state sales tax, plus any county surtax.
  • Excise and Fuel Taxes – Certain industries, such as transportation or alcohol distribution, are subject to additional excise taxes.
  • Reemployment (Unemployment) Tax – Employers must register with the Florida Department of Revenue and pay reemployment tax if they pay wages of $1,500 or more in a quarter.

Additionally, Florida requires S corporations to maintain workers’ compensation coverage for employees in most industries. Businesses in construction and manufacturing sectors, for example, face stricter coverage mandates under state labor laws.

Operating in compliance with these local tax obligations ensures that your Florida S corp maintains good standing and avoids penalties or dissolution.

Common Mistakes When Setting Up an S Corp in Florida

Many entrepreneurs misunderstand the process of how to set up an S corp in Florida and make preventable mistakes, including:

  • Skipping IRS Form 2553: Simply registering your corporation with Florida does not make it an S corp. You must file Form 2553 within the deadline.
  • Neglecting Payroll Setup: Failure to classify and pay shareholder-employees properly can trigger IRS penalties or reclassification.
  • Not Maintaining Records: Florida requires corporations to maintain minutes, bylaws, and shareholder agreements to remain in good standing.
  • Ignoring Multi-State Tax Exposure: If your business operates outside Florida, it may still owe taxes elsewhere despite Florida’s lack of state income tax.
  • Missing Annual Reports: Forgetting the May 1 filing can result in steep late fees and potential dissolution.

Taking a methodical approach, backed by professional tax and legal guidance, can help you avoid these common pitfalls and ensure your S corp remains compliant.

Advantages and Disadvantages of a Florida S Corp

Forming a Florida S corp provides numerous benefits but also includes some challenges business owners should consider:

Advantages:

  • Pass-through taxation: Income passes directly to shareholders, avoiding double taxation.
  • No state income tax: Florida’s lack of a state income tax allows shareholders to retain more profits.
  • Liability protection: Shareholders are not personally responsible for the company’s debts or obligations.
  • Self-employment tax savings: Only wages (not distributions) are subject to FICA taxes, potentially reducing overall tax liability.
  • Enhanced credibility: Forming an S corp can improve credibility with clients and lenders.

Disadvantages:

  • Strict eligibility requirements: S corps cannot exceed 100 shareholders and must have only one class of stock.
  • Limited ownership flexibility: Shareholders must be U.S. citizens or residents.
  • Increased administrative requirements: Payroll processing, annual meetings, and compliance filings increase paperwork.
  • Reasonable salary rule: The IRS requires owners actively working in the business to pay themselves a reasonable salary, limiting flexibility in profit distribution.

Overall, an S corporation in Florida is ideal for small-to-medium businesses that meet eligibility criteria and want to reduce tax liability while maintaining liability protection.

Frequently Asked Questions

  1. How long does it take to set up an S corp in Florida?
    Typically, it takes about one to two weeks to form your corporation and receive IRS approval for S corp status. Expedited filing through the Florida Division of Corporations can shorten the timeline.
  2. What forms do I need to file to create an S corp?
    You must file Articles of Incorporation with the state and Form 2553 with the IRS to elect S corp status.
  3. Can an LLC elect to be treated as an S corp in Florida?
    Yes. A Florida LLC can file Form 2553 to be taxed as an S corporation while maintaining its LLC legal structure.
  4. What are the main tax benefits of a Florida S corp?
    S corps enjoy pass-through taxation, meaning profits are reported on shareholders’ personal tax returns. Additionally, Florida imposes no state income tax on these earnings.
  5. Do S corps in Florida pay franchise tax?
    No. Unlike some states, Florida does not levy a franchise tax or corporate income tax on S corporations that meet state filing requirements.

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