Starting your small business in Florida takes some time and effort, but the savings will be worth it.
There are nearly 2 million active LLCs in Florida — with the number growing every day.
Your business can be next.
Starting a small business in Florida can be exciting, though the paperwork behind it might be overwhelming. This step-by-step guide will walk you through the major formalities so you can start running the business of your dreams.
These steps are designed for first-time business owners — the process for other types of businesses, like holding companies, might look different. Whatever your situation is, you should talk to a tax advisor first to make sure you’re making the right decisions from the get-go.
Step 1: Hire a CPA and a lawyer
Hiring a Certified Public Accountant (CPA) and/or a lawyer isn’t a requirement. However, having experts by your side can help make starting a business a lot easier.
They can guide you through all the steps below through different viewpoints. A CPA helps you structure your business in a way that saves you in taxes; a lawyer helps you structure your business in a way that legally protects you.
You shouldn’t have to make sense of the tax and legal implications of starting a business on your own — so having a CPA and lawyer by your side can save you from stress. In a lot of cases, it can also save you money. For example, if you elect to become an S corp but it turns out that it wasn’t the best move for you, it can be costly to change that election.
A CPA and/or lawyer might have been able to advise against becoming an S corp and saved you the hassle and money. So it doesn’t hurt to have a CPA and lawyer by your side even if you’re starting small.
Step 2: Choose your business structure
You’re ready to bring your business idea to life. But how your business looks behind the scenes — how you’re taxed and paid — will boil down to some paperwork.
There are two parts to structuring your business: legal structures and tax classifications. This is where a lawyer and CPA can help steer you in the right direction. Your legal structure, simply put, is choosing which three letters are at the end of your business name. The most common ones are LLC and INC.
Your tax structure determines how your new business entity is taxed. So once you decide to become an LLC, for example, you can elect to be taxed as an S corp or a C corp — or not make a tax election at all.
A sole proprietorship isn’t actually a type of legal entity. It’s basically the absence of one. As soon as you start selling your product or service, you’re operating as a sole proprietorship. Until you file to become a corporation (INC) or limited liability company (LLC) in your state, you’re regarded as a sole proprietorship — which means there’s no legal distinction between you and your business.
This may be a good option for someone who wants to run their business without having to go through the paperwork, but there are some major disadvantages. Since there is no legal distinction between you and the business, you could be personally liable for any lawsuits or debt that are caused by your business.
A limited liability company (LLC) is the most common type of small business structure because it’s easy to create and gives you the most flexibility.
LLCs make great options for first-time small business owners because you can have the same freedoms as a sole proprietorship without the limitations and hassle of a corporation. An LLC is a pass-through entity, which means you don’t have to pay a corporate tax. All of your business income is taxed on your personal income rate rather than a corporate income rate.
As a registered LLC, your business can either stick to its default tax status — a disregarded entity if there’s one owner or a partnership if there’s more than one owner — or make a special tax election, like an S corp election.
Corporations are a different type of business structure that’s usually reserved for larger companies.
This isn’t a great option for first-time small business owners. Corporations, by default, are taxed as C corporations. You’ll have to pay a lot more in taxes as a C corp.
With pass-through entities, all of your income is taxed at your personal income rate — and that’s it. C corp income is taxed first at a corporate rate. Then, if you receive profits from dividends, you're taxed again at your personal income rate.
Choosing a tax classification
Your business is made up of two parts: your legal structure and tax classification. If you’re a sole proprietor, you don’t have to worry about choosing a tax structure. But if your business is legally structured as an LLC or a corporation, you can make certain changes to how you’re taxed.
Your business is assigned a tax structure automatically when you register whether you realize it or not. Here’s how the IRS does it:
|Legal structure||Default tax status||Possible tax statuses|
|LLCs with one owner||Disregarded entity||
|LLCs with two owners||Partnership||
|Corporations (INC)||C corporation||
- S corp election: The main benefit of an S corp election is you don’t have to pay self-employment taxes on the distributions portion of your income. You are, however, required to pay yourself a salary that is subject to a 15.3 percent self-employment tax. In many situations, an S corp election can save you thousands of dollars.
- C corp election: Although it’s uncommon, an LLC can elect to become a C corp. A C corp isn’t a pass-through entity, so you might have to pay a corporate tax rate on your income and your personal income tax rate on dividends you receive. This is best for large companies that want to sell their stocks, and not small businesses.
Before you make any tax election, you should consult your CPA and lawyer.
Step 3: File Articles of Organization or Articles of Incorporation with the Florida Department of State
Once you’ve decided on how to structure your business, the next thing to do is make it official.
You’ll need to visit SunBiz.org to complete this section, which is the Florida Department of State’s Division of Corporations. In other words, it’s where Florida puts all their business stuff.
The phrase often used for starting your LLC is filing your Articles of Organization, which is the paperwork associated with providing the legal name for your business, your registered agent’s information, names of your officers and more. (Don’t worry, we’ll explain what those are below.)
If you’re forming a corporation, the phrase you’ll hear is Articles of Incorporation. Those also just include important formation paperwork.
Regardless of your business structure, you need a name for your business. There are two types of names your business can have: a legal name and a fictitious name.
LLCs and corporations can register for a legal name, which is their official name according to the state of Florida.
A fictitious name, sometimes called a DBA (doing business as), is something that any business can register for — including sole proprietors. You can have both a legal and fictitious name if you’ve registered your business as an LLC or corporation, and only a fictitious name if you’re a sole proprietor.
Many businesses prefer to have both a legal name and a fictitious name. Their legal name might be long-winded or too formal, so their fictitious name is a shorter, more conversational version of that. This differentiation is the reason you see the name “Publix” across the street and not “Publix Super Markets, Inc.”
You can check Florida’s database of businesses to check a name’s availability. There’s also an official FAQ on naming your business, among other things, that you should read so your name doesn’t get rejected by the state.
After you see if the name you want to use is legally available and before you officially request it, you should check to see if the web domain for that name is taken. The last thing you want is to snag a great name for your company just to find out you can’t name your website after it.
Once you decide whether to act as your business’ registered agent or hire someone else, you can officially file your Articles of Organization here.
A registered agent is a person or other business who receives important legal documents for your business, like lawsuits. They won’t receive every single envelope or package your business receives. They’ll only receive documents that require legal action from you.
You’ll need to decide on a registered agent at the time you register your business. Your business itself can’t be its own registered agent. However, a singular person in your business can. Most businesses opt to hire a third-party registered agent to help them decide the best course of action if they do receive a lawsuit, for example.
Step 4: Apply for an EIN with the IRS
Most businesses are required to have an Employer Identification Number (EIN), sometimes called your Taxpayer Identification Number (TIN). You’ll need an EIN to register for loans, file your taxes, hire employees, open a bank account and more. You can apply for it online here at the IRS website.
Every business needs an EIN if they want to open a business bank account, qualify for a business loan or hire employees. You can create it yourself — or if you’ve hired someone to register your business, they’ll likely handle it for you.
Step 5: Register with Florida Department of Revenue
After you’re done with Florida’s Department of State, your next stop is the Florida Department of Revenue. This step primarily serves to set up your state taxes and report your employees to the state.
You have to fill out this Florida Business Tax Registration application before you can pay sales tax and report employees.
The Department of Revenue website is where you’ll go to report and pay your sales tax. Small business owners should have a separate bank account to pay their sales tax. Pulling a sales tax report can help you determine how much money you need to set aside to pay the state of Florida.
Although your clients or customers are the ones giving you the money to pay your sales tax, that money still isn’t yours — it’s Florida’s. Creating that distinction with a bank account makes it a little less painful to hand that money over. This also protects you from the legal problems you could run into if you misappropriate your sales tax money.
Report new employees
You have to report all new hires to the Florida Department of Revenue within 20 days of their start date.
You can view all the ways to report new employees on this page. The easiest way to do it is online, which you can do at this page. A payroll software may also be able to do this for you automatically when you onboard a new hire or contractor.
Step 6: Open a business bank account
As soon as you receive your EIN, you should open a separate bank account for your business. Using your personal bank accounts for business could potentially cause legal issues for you down the road. (Learn which type of accounts you should be opening in more detail here.)
Even if your business is just you to begin with, you shouldn’t use your personal bank account for business transactions. When tax season rolls around, you can’t tell personal expenses from business expenses — which makes it harder to make deductions. It also makes your bookkeeping a lot easier, which gives you a more accurate financial picture of your business.
When your business gets off the ground, you should have at least one bank account right off the bat that you keep for operating expenses. As you grow your business and start to hire employees, you can create more checking accounts that are for payroll and savings.
You’ll also need to open a separate business credit card, which sometimes requires an EIN.
Step 7: Obtain licenses, permits and insurance
You’re not done yet.
Business owners sometimes don’t apply for certain licenses, permits or insurance until they need it. There are policies that can vary across different businesses, locations and industries, but the ones below are applicable across the board. Getting these when you start your business gives you both financial security and peace of mind.
If you’re not sure whether these apply to your new business, check your county and city website.
Licenses and permits
You may need certain licenses and permits depending on your industry and location in Florida. Here’s how to find the ones you need:
- City licenses: Cities often require a business tax receipt and certificate of use. Check your county’s business website to find out what exactly you need. For example, here’s a list of Orlando business permits you might need. You can find the business websites for every Florida city here.
- County licenses: This level is where you’ll have to apply for the most permits and licenses. Your county likely requires you to have certain building, zoning, environmental permits, among others. Orange County has all of its license and permit requirements online. You can find the business websites for every Florida county here.
- Federal licenses: Small businesses usually don’t have to worry about any federal applications beyond their EIN. The Small Business Administration (SBA) provides a list of industries that may require them — and where to apply.
Don’t wait until it’s too late to find insurance. These types of insurance can apply to business owners of all industries:
- General liability insurance (or business liability insurance): This is a basic insurance plan that protects you from costs associated with bodily injuries and property damage.
- Employment Practice Liability Insurance (EPLI): Business liability insurance doesn’t cover everything. EPLI covers costs of employee lawsuits.
- Auto insurance: Even if you don’t have a company car, you’ll need business auto insurance for your personal vehicle if anyone is driving it on behalf of your business.
- Cyber liability insurance: This protects you from costs associated with security breaches or other online incidents.
- Workers' compensation: Workers’ compensation is required for every business with employees — and requirements may vary depending on your industry and the number of employees.
Your CPA and lawyer could help match you with the best policies, but you should also seek a good insurance broker if you can. There are traditional brokers that you can speak to as well as digital ones. If you use Gusto, you have access to resources like AP Intego, which is a digital broker.
Step 8: Get the right software
There’s still some work to do once all the paperwork is done and your LLC is up and running. The next step after you create your business is building the infrastructure to run it.
Regardless of your industry, your business needs software to communicate and manage your finances.
Many business owners don’t hire employees right off the bat — and operate as a one-man band. Even if that’s the case, you should avoid running payroll by yourself and get software instead.
There are plenty of payroll software options available. Some of the most popular softwares for small businesses include:
You can find out the pros and cons of each payroll software here. We recommend Gusto most of the time because it’s affordable and the easiest to use compared to its competitors. Whatever your preferences are, it’s important that you have software to handle your payroll — because if you don’t withhold your taxes correctly, you could face penalties and interest.
Accounting software is just as essential as payroll software. It makes your bookkeeping, invoicing and reporting a lot easier. And when your accounting is easier, automated and accurate — you’ll have a more relaxing tax season.
These are some of the most popular accounting software options:
Our review of the pros and cons of each accounting software option is here — and we typically recommend Xero. Like Gusto, it’s affordable and easy-to-use. Xero makes reconciling your accounts and pulling reports like balance sheets and income statements quick and simple.
Just like every business has money flowing in and out, every business needs to communicate with each other.
You should plan to buy email software — especially if you’re planning on hiring employees. And if you want to stay organized with your business’ files, a storage software like Google Drive is also a worthwhile purchase.
Payroll, accounting and email software are applicable to all businesses. There might be other software that’s specific to your industry that you also might need before you can start your business.
The bottom line
Starting a business is exciting — but it’s not easy. There’s a lot of red tape you have to cut through, depending on the type of business you want, before you can make your first sale and build the business of your dreams.
The first step in creating a business — in Florida and elsewhere — shouldn’t be to file any paperwork. It should be to pick up a phone and find a team of experts that will have your back throughout the process, like a CPA and a lawyer.
The decisions you make before you even start your business can have a huge influence on how you run it. You might have to pay yourself a salary or handle your business debt yourself, depending on your business structure.
However, you don’t have to make those big decisions alone. Talk to one of our advisors today and learn how we could help take a lot of these steps off your shoulders so you could have more time to focus on the parts of your soon-to-be business that you love.