S Corp in Florida: Everything You Need to Know
Forming an S Corp in Florida is a very good decision, as this state is business friendly thanks to an attractive tax climate.3 min read
2. What is an S Corporation?
3. S Corporation Benefits
Forming an S Corp in Florida is a very good decision, as this state is business friendly thanks to an attractive tax climate.
An Overview of S Corporation in Florida
Many business owners choose to incorporate or form limited liability companies (LLC) in Florida due to the state's friendly attitude towards businesses. For example, because of the beneficial tax laws, Florida was ranked number five on the 2007 State Tax Business Climate Index released by the Tax Foundation.
When it comes to forming a business, the three best states to choose are:
Businesses that decide to incorporate in Florida will need to decide which type of corporation best meets their needs. For many reasons, forming an S corporation is one of the most popular options or structuring a corporation in this state. When you're ready to incorporate your Florida business, you must provide the Department of State's Division of Corporations with your Articles of Incorporation.
Your Articles of Incorporation must list:
- The name and address of your Florida company.
- The purpose of your corporation.
- How many shares you corporation will be allowed to issue.
- The contact information for your Registered Agent.
- Contact information for your incorporator.
When naming your S corporation, be sure to include required designators such as Company, Co., Incorporated, or Inc. You are also allowed to enter your officer's and first director's names. You can mail your Articles of Incorporation and the required fee to the Florida Department of State.
What is an S Corporation?
S corporations are a type of corporation that has made the decision to reduce its tax burden by passing losses, deductions, income, and credit to shareholders. This helps to avoid the double taxation that applies to C corporations. Another way to understand an S corporation is as a C corporation that has elected a special tax status by filing Form 2553 with the IRS. FL Subchapter S Corporations are only required to pay taxes for built-in gains and some types of passive income.
If you form an S corporation, your shareholders will be required to use their personal tax returns to report losses and income. S corporations are also known as standard business corporations.
Choosing S corporation status means that your company will not be taxed separately from its shareholders. Instead, your corporation's income will be taxed exactly the same as income earned by sole proprietorships or partnerships. Corporate income will be passed to shareholders for reporting on their individual returns, which prevents S corporation profits from being taxed twice.
The Articles of Incorporation of an S and C corporation are exactly the same. In addition, both types of corporation shield their shareholder's personal assets from company liabilities. Whichever corporation type you choose, you must hold an annual shareholder's and director's meeting and record the minutes of this meeting.
If you want to be eligible for S corporation status, your company cannot have more than seventy-five shareholders. Also, there must be a written agreement signed by your shareholders agreeing to elect S corporation status. Your corporation is only allowed to use one class stock if you want to be taxed as an S corporation.
You can visit the IRS website for full instructions for filling out and filing Form 2553.
S Corporation Benefits
There are a variety of benefits that your company can receive if you meet the requirements for S corporation status. For example, achieving Florida Subchapter S status provides your business with credibility, which may result in higher earnings. Florida clients are typically more trusting of S corporations than other corporate structures because these companies are harder to form and require effort to maintain.
The biggest benefit of forming an S corporation is the ability to be taxed as a pass-through entity. As a pass-through entity, your company will be able to avoid paying federal income taxes. This is because corporate earnings are reported on the shareholder's tax returns instead of a corporate tax return. This is helpful as other income can be used to balance losses of the business.
With an S corporation, you will also have the ability to easily transfer company ownership. Other business structures, such as limited liability companies, can be dissolved if more than 50 percent of ownership is transferred.
If you need help with forming an S Corp in Florida, you can post your legal needs on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.