Frequently Asked Questions

• GENERAL QUESTIONS

  How do you form a corporate entity (i.e., corporation, nonprofit, or LLC) in Florida and how long does the process take?

  A corporate entity is created by filing “articles of incorporation” (in the case of a corporation) or “articles of organization” (in the case of an LLC) with the Florida Department of State’s Division of Corporations. Upon ordering your corporate entity, we will electronically file your entity’s articles with the Florida Division of Corporations. It typically takes between 3 – 5 business days to file and process a corporate entity with the State. When your articles have been filed and returned to us, we will deliver the articles to you with a stamp showing that the document was filed with the State of Florida.

  What is an EIN and will I need to obtain one for my corporate entity?

  The EIN is your corporate entity’s Employment Identification Number. The IRS assigns an EIN to business entities. The EIN is used to identify a business entity and to identify taxpayers that are required to file business tax returns with the IRS. You may apply for an EIN by filing Form SS-4 or by calling the IRS at 1-800-829-4933. You can also apply for an EIN online on the IRS website. (www.irs.gov)

  We can also assist you in obtaining your corporate entity’s EIN.

  How do I register to pay Florida sales tax and apply for a resale certificate for my business with the Florida Department of Revenue?

  You may have to register to pay taxes in the State of Florida by filing Form DR-1 (Application to Collect and/or Report Tax in Florida) with the Florida Department of Revenue. Upon registering to pay taxes with the Department of Revenue, you will receive, among other documentation, a Certificate of Registration (DR-11), Annual Resale Certificate (DR-13), an initial supply of tax returns, a Sales Tax Rate Table (DR-2X), and brochure entitled Beginning Your Relationship with the Florida Department of Revenue.

  Form DR-1. To register to pay Florida taxes, you must complete and submit Form DR-1 to the Florida Department of Revenue. Please note, the Form is included in our Corporate Kits. You can register to pay the following Florida taxes with Form DR-1, if applicable: Sales and Use tax, documentary stamp tax, communications services, gross receipts tax, solid waste fees and pollutants tax.

  Certificate of Registration. You are required under Florida law to post your Certificate of Registration in a conspicuous place so that your customers will know that you are authorized to collect Florida sales tax from them.

  Annual Resale Certificate. The Annual Resale Certificate permits businesses to make tax-exempt purchases or rentals for resale. It is important to note that when you buy goods using your Annual Resale Certificate, it is your responsibility to ensure the goods are actually purchased for resale.

  For more information, the Florida Department of Revenue can be reached at (800) 352-3671. The Department has a helpful brochure entitled, “Guide for Business Owners”, which furnishes detailed information for business owners about various Florida taxes.

  How do I obtain an occupational license or professional license in order to properly operate my business in Florida?

  An occupational license or business license is required for most business activities in Florida. Typically, occupational licenses are issued by the city or county in which the business is physically located. You should check with your city clerk and county tax collector for guidance in obtaining an occupational license for your business.

• CORPORATION QUESTIONS

  What is a Corporation?

  A corporation is a separate legal entity that is created under state law. When you incorporate a business, you are actually creating an “artificial person” which operates your business as a legal entity which is separate and distinct from its owners (i.e., shareholders). A corporation, like a natural person, can own property, incur debt, enter into contracts, purchase and sell property, sue and be sued, and engage in other such activities in order to further its business purposes. Chapter 607, Florida Statutes (“F.S.”), governs the formation and operation of corporations within the State of Florida.

  To form a corporation in Florida, you must file articles of incorporation with the Florida Department of State’s Division of Corporations and pay the State’s filing fees. We are available to assist you in creating your own Florida corporation.

  What are the benefits of operating my business as a corporation?

  Limited Liability Protection: Owners of a corporation are not generally responsible for the debts and obligations of the corporation.

  Raising Capital: You have greater opportunity to raise money for your business through the issuance of corporate stock to potential investors.

  Easy Transfer of Ownership: With ownership of stock, there is relatively easy transfer of ownership from one party to another. In addition, if an owner dies, the corporation’s existence will continue.

  Tax Advantages: There may be significant tax advantages associated with operating your business as a corporation.

  How do I choose a corporate name for my business?

  Your “corporate name” is the legal name of your corporate entity that is registered with the Florida Department of State. Before choosing a corporate name, you should check with the Florida Department of State (Division of Corporations) to determine whether your preferred corporate name has already been registered. As part of our service, we will conduct a preliminary name search with the Division of Corporations to make sure your preferred corporate name is not already in use.

  In Florida, the following guidelines must be followed in using a corporate name:

  • The corporate name must contain the word “corporation”, “company”, or “incorporated” or the abbreviation “corp.”, “Inc.”, or “Co.” so that the corporate name will clearly indicate that it is a corporation, and not a natural person or partnership;
  • The corporate name may not contain language stating or implying that the corporation is organized for a purpose other than those purposes which are permitted in Florida’s Business Corporations Act (Chapter 607, F.S.) and its articles of incorporation;
  • The corporate name may not contain language stating or implying that the corporation is connected with a state or federal government agency or a corporation chartered under the laws of the United States; and
  • The corporate name must be distinguishable from the names of all other entities or filings which registered or on file with the Florida Department of State’s Division of Corporations (except fictitious name registrations under Section 865.09, F.S.)

  (Source: 607.0401, F.S.)

  What is a “fictitious name” and will I need to register my fictitious name in Florida?

  A corporation (or other legal entity, such as an LLC) may conduct its business under a name other than its legal corporate name. For example, the legal name of your Florida business might be “XYZ, Inc.” but you operate your business under the “fictitious” name, “Frank’s Flowers”. Florida law defines a “fictitious name” as any name under which a person transacts business in this State, other than the persons’ legal name. (865.09, F.S.).

  A fictitious name must be registered with the Florida Department of State, Division of Corporations. The purpose of registration of the fictitious name is to insure that there is public notice of the identity of the owner of the fictitious name. Registration of a fictitious name with the State will not reserve or protect a fictitious name against use by another party, nor does it provide rights to the use of a trade name, trademark, service mark or corporate name.

  What is a “C” Corporation?

  A “C” corporation is just another name for a regular for-profit corporation. The letter “C” is a federal tax designation and specifically comes from Subchapter C of the Internal Revenue Code. A corporation that is taxed as a “C” corporation is taxed under normal corporate income tax rules, which differs from the tax treatment given to “S” Corporations. “S” corporations are taxed under Subchapter “S” of the Internal Revenue Code.

  A “C” corporation is taxed as a separate entity. The distinctive feature of the C corporation is that profits generated by this type entity of are subject to “double taxation”. First, profits which are generated by the business will be taxed at corporate income tax rates. Second, if profits of the business are later distributed to its owners, or shareholders, the owners will then report and pay taxes on the profits (or dividends) distributed to them by the corporation. At the end of the year, the C corporation files a corporate income tax return, IRS Form 1120, Corporation Income Tax Return, and pays its own income taxes on the profits left in the business.

  What is an “S” Corporation and how do you create an “S” Corporation?

  An “S” corporation is a corporation that qualifies for special tax treatment. The “S” refers to a federal tax designation and comes from Subchapter S of the Internal Revenue Code. The tax treatment of S corporations differs from that of C corporations. Unlike C corporations, S corporations are “pass through” tax entities and are not subject to double taxation. In a nutshell, this means that the profits generated by an S corporation are not taxed at the corporate entity level at all. Instead, all of the profits of an S corporation “pass through” the entity and are reported on the individual tax returns of its owners, or shareholders. This pass through tax treatment is probably the most attractive feature of an S corporation. An S corporation must annually file Form 1120S, U.S. Income Tax Return for an S Corporation, with the IRS.

  Forming an “S” corporation essentially requires a two-step process. First, like with any other corporation, you must file articles of incorporation with the State in order to bring “life” to your corporation. Then, to convert the new entity into an S corporation, the shareholders must sign and file an S corporation tax election by filing Form 2553, Election by a Small Business Corporation, with the IRS. The Form must be submitted to the IRS within the first 2 and ½ months of forming your corporation. If you incorporate with us, we can furnish to you the IRS Form 2553 (and the form’s instructions) at no extra charge. If you wish us to assist you in preparing this Form, we can do so for a modest fee of $25.00.

  Are regular corporations subject to taxation in the State of Florida?

  Corporations doing business in Florida may be subject to Florida’s corporate income tax and will need to file Form F-1120, Corporate Income/Franchise and Emergency Excise Tax Return, with the Florida Department of Revenue. Florida’s corporate income tax rate is 5.5% on income above $5,000. For more information regarding Florida’s corporate income tax, you should contact the Florida Department of Revenue or a tax professional.

  Is an “S” corporation subject to taxation in Florida?

  S corporations are generally not required to file a Florida corporate income tax return. However, if an S corporation has federal taxable income, the S corporation is required to file a Florida corporate income tax return and pay any tax due. For more information, you should contact the Florida Department of Revenue.

  What are corporate by-laws?

  The by-laws are the internal rules by which the corporation will be operated by its directors and officers. Generally, the by-laws cover, among other things, where and when shareholders’ and directors’ meetings will be held, how shareholders and directors will be notified of meetings, how directors will be elected, who is entitled to vote, the powers of the directors, how directors and officers may be removed, and any other provisions for managing the business and regulating the affairs of the corporation that are not in conflict with the articles of incorporation or state (Florida) law.

  The By-laws of the corporation should be adopted at the organizational meeting of the incorporators or board of directors. (607.0206, F.S.) It is important to adopt a set of by-laws in order to maintain the legal status of your corporate entity. Please note, a set of by-laws is included in our corporate kit.

  How many directors and shareholders are required in Florida?

  In Florida, one person may serve as the sole director, officer and shareholder of a corporation. (607.0803, F.S.).

  Does my corporation need a registered agent?

  Florida law requires the designation of a registered agent and registered office of the corporation. (607.0505, F.S.) The role of the registered agent is to receive legal papers (service of process) and other official notices on behalf of the corporate entity. A registered agent may be an individual (such as an officer of the corporation or its attorney) or a business which provides registered agent services. The registered office of the registered agent must have a Florida physical address.

  What is a shareholders agreement and do I need one?

  A shareholders agreement is a contract entered into among the shareholders (owners) of the corporation in order to define their respective rights and responsibilities with respect to one another and to the corporation. A shareholders’ agreement also serves the purpose of providing a mechanism for resolving disputes between and among shareholders of the corporation. While Florida law does not require shareholders to enter into a shareholder agreement, from a practical point of view, it may be advantageous to have a shareholders agreement. A business attorney may assist you in preparing a shareholders agreement for your corporation.

  What is a stock certificate?

  Stock is issued to a corporation’s shareholders (owners) to show that they own a part of the business enterprise. The term stock is used interchangeably with the term “share”. A stock certificate is a document which evidences a person’s ownership of stock in a corporation.

• LLC QUESTIONS

  What is an LLC?

  A limited liability company (“LLC”) is, in a sense, a cross between a corporation and a partnership. In a nutshell, an LLC gives its owners (i.e., “members”) the limited liability protection of a corporation with the tax attributes of a partnership. Members of an LLC, like the shareholders of a corporation, are not generally liable for the debts and obligations of the LLC. Like a partnership, the LLC “entity” is not subject to income taxation. Instead, the profits generated by the LLC “pass through” directly to the members, who will then report their share of the LLC’s profits on their individual tax returns.

  How do you incorporate an LLC in Florida?

  In order to create an LLC in Florida, articles of organization must be filed with the Florida Department of State, Division of Corporations. (608.407, F.S.). We can assist you in setting up your Florida LLC with the Division of Corporations. Additionally, in order to maintain an active status, LLC’s in Florida must file a Uniform Business Report with the Florida Department of State each year between January 1 and May 1, and pay the appropriate filing fee.

  What are the benefits of an LLC?

  Limited Personal Liability Protection: Similar to a corporation, the owners, or members, of an LLC are not personally liable for the debts of their business or claims made against it. With limited liability protection, the personal assets of the members are not subject to being taken by the creditors of your business.

  Flexible Capital Structure: LLC members enjoy the benefits of a structure that allows great ownership flexibility of among its member-owners.

  Flexible Distribution of LLC Profits & Losses: Typically, LLC’s will divide up profits and losses according to how much of the LLC each member owns. However, the LLC offers great flexibility in that LLC owners can choose to divide profits and losses pretty much in any manner they wish (subject to IRS rules).

  Pass Through Income Taxation: One of the biggest benefits of the LLC has to do with its tax status. Like partnerships, an LLC is automatically recognized by the IRS as a “pass through” tax entity. In simple terms, this means that all of the business’s profits and losses “pass through” the business and are reflected and taxed on the owners’ individual tax returns. In contrast, the profits and losses of a C corporation must be reported and taxed on a separate corporate tax return, at special corporate income tax rates.

  Flexible Management Structure: LLC’s are typically managed by their members (i.e., the owners), unless the members choose to elect management by a manager or management group. Management of the LLC by its members is called “member-management” while management of the LLC by a manager or group of managers is called “manager-management”. In Florida, unless otherwise provided for in the LLC’s articles of organization or operating agreement, the LLC will be deemed a member-managed company. (608.422, F.S.)

  How do I choose a name for my LLC?

  In Florida, the following guidelines must be followed in choosing your LLC name:

  • The LLC name must contain the words “limited liability company”, or either one of the following abbreviations: “L.L.C.” or “LLC”.;
  • The LLC name must not contain language which states or implies that the LLC is organized for a purpose other than what is permitted under Florida law or the LLC’s articles of organization;
  • The LLC name must not contain language which states or implies that the LLC is connected with a state or federal agency or a corporation or other entity chartered under the laws of the United States; and,
  • The LLC name must be distinguishable from all other entity names on the records of the Florida Department of State, Division of Corporations, except for fictitious name registrations and general partnership registrations.

  (608.406, F.S.)

  How many persons are required to incorporate an LLC in Florida?

  One (1) or more persons may incorporate an LLC with the Florida Department of State. (608.405, F.S.)

  How is an LLC taxed in Florida?

  An LLC is generally not required to file a separate Florida corporate income tax return and is exempt from corporate income tax in Florida. However, there are exceptions to this general rule. For example, the income of the LLC is not exempt from tax if the LLC is owned by a corporation. Please contact the Florida Department of Revenue for further information.

  Will I need to designate a registered agent for my Florida LLC?

  Yes. You will be required to designate a registered agent for your Florida LLC. (608.415, F.S.). The role of the registered agent is to receive legal papers (service of process) and other official notices on behalf of the LLC entity. A registered agent may be an individual (such as a member or manager of the LLC) or a business which provides registered agent services. The registered office of the registered agent must have a Florida physical address. The designation of the registered agent and registered office of the LLC will be contained within the Articles of Organization.

  Who is generally responsible for running and operating an LLC, and what are the distinctions between “members”, “managing members”, and “managers”?

  In Florida, management of an LLC will be vested in the LLC’s members (unless provided otherwise in the articles of organization or operating agreement). A “member” is a person who has a financial or economic interest in the LLC. Alternatively, if provided for in the LLC’s articles of organization or operating agreement, an LLC may be operated by a manager or group of managers. A “manager” is typically a person who is appointed or elected to operate the LLC, but who is not necessarily a member of the LLC. A manager is typically an “outsider” who is brought in to run the day-to-day operations of the LLC. Finally, a “managing member” is a person who has a financial interest in the LLC and who has been appointed to manage the daily operations of the LLC.

  Most smaller LLC’s choose to run their operations by its members, that is, they choose Member-Management. The reason is that the member-owners will want to control the daily operations of the LLC. However, in certain situations, it could be beneficial for the owners to choose an outsider, i.e., a manager, to run the day to day operations of the LLC. For example, if running the LLC requires special expertise or business know-how, the members may choose to hire a manager who has specific qualifications to manage the LLC’s day to day operations.

  What is an operating agreement and should I adopt an operating agreement for my LLC?

  An operating agreement is a document which regulates the affairs of the LLC and the conduct of the LLC’s business, establishes rights and duties among the members, managers and the company, and governs the relations among such parties with respect to one another and the LLC. The members of an LLC are not required to have an operating agreement in Florida. However, in practical terms, it may be a good idea to enter into an operating agreement in order to assure that the rights and responsibilities of all affected parties are clearly laid out in a written document. You may wish to consult an attorney for assistance.

• Non Profit Questions

  What is a non profit corporation?

  A non profit or not for profit corporation is an entity which utilizes the revenue and/or income it generates to promote the non profit’s purposes, programs and activities. In contrast, a “for-profit” entity’s purpose is to distribute the profits it generates to the owners of that entity. A non profit organization may be formed, for example, for the purpose of promoting charitable, educational, religious, or scientific purposes. However, a non profit organization does not necessarily need to be charitable and can serve other functions. For example, a non profit entity may be formed to serve as a fraternal organization, a social or recreational club, a political organization, a business league or trade association, or a homeowners association, just to name some examples. Non profit organizations are usually tax exempt.

  How do you incorporate a non profit in Florida?

  A non profit corporation is formed by filing articles of incorporation with the Florida Department of State, Division of Corporations. We can assist you in filing the documents which are necessary to establish your Florida “not for profit” corporation.

  How many directors are required for a Florida non profit or not for profit corporation?

  A Florida non profit corporation is required to have a minimum of three (3) directors. (617.0803, F.S.) However, the By-laws of the corporation may require the non profit corporation to have a greater number of directors.

  Are members required for a non profit corporation in Florida?

  No, a non profit corporation in Florida is not required to have members. (617.0601, F.S.)

  Is a non profit corporation subject to taxation in Florida?

  A non profit corporation may or may not be subject to taxation in Florida. However, many non profit corporations are tax-exempt organizations and tax exempt organizations are generally not required to file a Florida corporate income tax return if they do not have federal taxable income. If tax-exempt organizations have federal taxable income, however, they are then required to file a Florida Form F-1120 or F-1120-A and pay any tax due. For further information you should contact the Florida Department of Revenue or seek the advice of an accountant.