Online Florida LLC FAQ

how to file taxes for llc

What is a limited liability company?

A limited liability company, commonly called an "LLC," is a business structure that is similar to a corporation, but less formal. Business owners form LLCs to protect themselves from being personally liable for business debts.

LLCs combine the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation. As in a partnership or sole proprietorship, income "passes through" the LLC to the LLC owners, and the owners report the business's income on their personal income tax returns. Unlike a corporation, the LLC itself is not a separate taxable entity.

Like owners of a corporation, however, all LLC owners are protected from personal liability for business debts and claims -- a feature known as "limited liability." This means that if the business owes money or faces a lawsuit for some other reason, only the assets of the business itself are at risk. Creditors usually can't reach the personal assets of the LLC owners, such as a house or car. (However, both LLC owners and corporate shareholders can lose this protection by acting illegally, unethically, or irresponsibly.)

For these reasons, many people say the LLC combines the best of partnerships and corporations.

The decision to form an LLC is an important one. Like a corporation, an LLC is meant to be a permanent legal entity, and it will exist -- and incur taxes and fees, whether or not you are actively operating a business -- until you take legal steps to dissolve it.

To learn more about limited liability companies and whether an LLC is the right structure for your company, visit the Limited Liability Company area of Nolo's website.

How many people do I need to form a Florida LLC?

You can form a Florida LLC with just one owner.

Is an LLC right for my business?

You should consider forming an LLC if you plan to run a business and are concerned about personal exposure to lawsuits or debts arising from your business. For example, if you decide to open a store-front business that deals directly with the public, you may worry that your commercial liability insurance won't fully protect your personal assets from potential slip-and-fall lawsuits or from claims by your suppliers for unpaid bills. Running your business as an LLC may help you sleep better, because it instantly gives you personal protection against these and other potential claims against your business.

Corporations also provide this protection from personal liability. Which is better? For many small businesses, the relative simplicity of the LLC makes it the better choice.

However, corporate taxation is very different from the taxation of LLCs, and this can be a deciding factor in which type of business you form. For instance, if your business will hold property such as real estate that's likely to increase in value, an LLC may make more sense, because corporations and their shareholders are subject to a double tax (both the corporation and the shareholders are taxed) on the increased value of the property when the property is sold. On the other hand, corporate income tax rates start out low -- 15% -- so having the corporation rather than the owners taxed on some of the income may make sense.

Note that not all businesses can operate as LLCs. Businesses in the banking, trust, and insurance industry, for example, are typically prohibited from forming LLCs.

In addition, some businesses are so small that the fees and paperwork involved in setting up and running an LLC just aren't justified. If it's lawsuits you're worried about, often a commercial liability insurance policy can shield your assets sufficiently. (However, insurance does not cover unpaid business debts.)

For more information on whether an LLC is the right structure for your business, visit the LLCs, Corporations, Partnerships, etc. area of Nolo's website or read Nolo's book LLC or Corporation? How to Choose the Right Form for Your Business . by attorney Anthony Mancuso (available as a downloadable eBook). Or, if you'd like the advice of a professional, our website features an online lawyer directory as a free resource to our customers. Comprehensive profiles of attorneys in your state can be found at http://www.nolo.com.

How do I form a Florida LLC?

In Florida, you create an LLC by filing "articles of organization" with the Secretary of State's office and paying a filing fee. You'll also need an LLC operating agreement, though it doesn't need to be filed with the Secretary of State. Your operating agreement explicitly states the rights and responsibilities of the LLC owners. An operating agreement clarifies the business arrangement between the owners and governs how your LLC will be run. If you don't create a written operating agreement, the LLC laws of your state will govern the inner workings of your LLC.

After articles of organization filing is accepted by the Secretary of State and you have an operating agreement, your LLC is official, but you will still need to obtain the licenses and permits that all new businesses must have to operate. These may include a business license (sometimes also referred to as a "tax registration certificate"), a federal employer identification number, a seller's permit, or a zoning permit. Forming an LLC does not exempt you from any of these requirements that apply to all businesses.

For more information, see the Licenses & Permits for Your Business area of Nolo's website.

To begin creating your Florida LLC, visit the Online Florida LLC page at the Nolo website.

How much will it cost to form my Florida LLC?

The price of Nolo's Online Florida LLC formation service varies depending on your needs.

Nolo's Basic Service. The price starts as low as $89.00 for Nolo's Basic Service, which includes a customized operating agreement and preparation and filing of the articles of organization.

Nolo's Express Premiere Service. For all of these items plus Priority Rush Filing, 2nd-Day Air Shipping of your final package, preparation of the IRS application for a tax ID (Form SS-4), choose Nolo's Express Premiere Service for $299.00. With Priority Rush Filing, your LLC will be formed within 5 business days, and you'll receive your final LLC package and LLC records kit 3 to 4 business days later.

Note that filing fees charged by the state are not included in our package prices. The Secretary of State charges $155. This filing fee will be added to your total when you check out.

In addition, you will need to send in your annual report along with a filing fee of $138.75 each year on the anniversary of the LLC's formation.

To compare Nolo's Florida LLC packages, see the package and pricing details .

How long will it take to form my Florida LLC?

If you order the Basic package, we will file your paperwork with the Florida Secretary of State within 4 to 5 business days and send you your completed LLC package within 10 business days.

If you order the Express Premiere package, we will file your paperwork with the Florida Secretary of State within 1 business day. We will send your completed LLC package and your LLC records kit within 5 business days, by 2-day shipping.

In the unlikely event that the Florida Secretary of State is experiencing problems, these estimated turnaround times may vary.

How long do I have to work on my LLC formation?

You have 90 days to work on your LLC formation without purchasing it. Every time you work on your LLC formation through Nolo's Online Legal Forms, your answers are automatically saved in the system.

Once you complete and pay for your LLC formation, Nolo's Online Legal Forms will store your personal information for one year.

Will I have to pay taxes on my Florida LLC?

Federal taxes. The IRS does not impose taxes on the LLC; LLC income is reported on the members' individual tax returns.

State taxes. Visit the Florida Department of Revenue's website at http://dor.myflorida.com/dor/taxes/corporate.html to learn about state LLC taxes in Florida.

Self-employment taxes. LLC members (owners) who are active in the business will probably have to pay self-employment taxes on their share of LLC profits -- just as partners in a partnership do.

Fortunately, an LLC member can deduct, as a business expense, half of the self-employment taxes paid. (Members in manager-managed LLCs may not have to pay self-employment taxes if they are not active in the business; if you are in this situation, consult a tax adviser to see if you should pay self-employment taxes.)

Do I need a lawyer to form an LLC in Florida?

No. You can form your own LLC by filing the articles of organization with the Secretary of State. This is a simple document that doesn't have to be drafted by a lawyer. It contains just basic information -- the name of the LLC, the location of its principal office, and the name and address of the LLC's registered agent. Nolo's Online Florida LLC formation service can do this for you.

You'll also need an LLC operating agreement, though it doesn't need to be filed with the Secretary of State. Your operating agreement explicitly states the rights and responsibilities of the LLC owners, clarifies the business arrangement between the owners, and governs how your LLC will be run. Nolo's Online Florida LLC formation service provides you with a customized operating agreement.

That said, if you're trying to decide whether the LLC is the right structure for your business, you may want to consult a business lawyer or tax expert. Our website features an online lawyer directory as a free resource to our customers. Comprehensive profiles of attorneys in your state can be found at www.nolo.com .

If you are trying to convert a corporation or partnership into an LLC, you should consult an attorney. There are some legal and

tax ramifications to closing down an existing business and starting a new one that are beyond the scope of our service.

Does my LLC need an operating agreement?

Florida does not require you to file a written operating agreement, but you shouldn't consider starting a business without one. Here's why an operating agreement is necessary:

  • It helps to ensure that courts will respect your personal liability protection by showing that you have been conscientious about organizing your LLC.
  • It sets out rules that govern how profits will be split up, how major business decisions will be made, and the procedures for handling the departure and addition of members.
  • It helps to avert misunderstandings among the owners over finances and management.
  • It allows you to create your own operating rules rather than being governed by the default rules in your state's LLC laws, which might not be to your benefit.

Learn more about operating agreements in the Limited Liability Company section of Nolo's website.

Can I form an LLC in a different state than the one in which my business will operate?

You can form an LLC in any state, regardless of whether your business will be there or if any members live there. But if you form an LLC out of state, you will probably still need to qualify your LLC to do business in your home state -- and this means you'll have to file additional paperwork and pay additional fees. For more information on whether you'll need to qualify to do business in certain states, read the article Qualifying to Do Business Outside Your State on Nolo's website.

Note that if you don't register to do business in another state when required, you won't be able to enforce contracts in that state. You will also need to maintain a "records office" -- where you keep legal, financial, and tax records -- in the state where you form your LLC. To avoid these hassles, most smaller LLCs that will operate in only one state form their LLC in their home state.

Be ready for some state tax complications if you form your LLC in a state that's different from the state where all of its members live. For one thing, the LLC members might have to pay personal income taxes in the other state on LLC income. (At best, you might get credit for those taxes in your home state and not have to pay twice. At worst, you might have to pay taxes you wouldn't have had to pay at home.)

Other state taxes vary from state to state, and might influence your choice of location for an LLC. An LLC -- like any business -- has to pay franchise taxes, sales and use taxes, other transaction and excise taxes, and employment, property, and transfer taxes.

If your principal office is located in Florida, you can avoid these potential complications. Nolo will form your LLC if your business is outside the state, but your business must be based in the United States.

Are LLC members subject to self-employment taxes?

An LLC member who is active in the business -- like a partner in a partnership -- has to pay self-employment taxes on his or her share of LLC profits. You can deduct half of what you pay for self-employment taxes as a business expense.

Members in manager-managed LLCs may not have to pay self-employment taxes if they are not active in the business. The self-employment tax situation for LLC members has been a subject of controversy and temporary regulations, and the dust has not yet settled around many of the issues. If you plan to be an inactive member of an LLC and don't plan on paying self-employment taxes, get an opinion from a local tax expert -- preferably one who is willing to argue his or her opinion to IRS officials, if it comes to that.

Do LLC membership interests need to be registered as securities?

If any of your members will not be active in the LLC or if you choose manager-management for your LLC, you may need to comply with federal and state securities procedures when setting up your LLC. (If you'll be the sole owner of your LLC and you don't plan to take investments from outsiders, your ownership interest in the LLC will not be considered a "security" and you don't have to concern yourself with these laws.)

Membership interests in a manager-managed LLC might be classified as securities because nonmanaging members may be investing their money in a business in which they are not actively participating.

A security is defined as an investment in a profit-making enterprise by an investor who is not running the company. If a person invests in a business with the expectation of making money from the efforts of others, that person's investment is generally considered a "security" under federal and state law. Conversely, when a person will rely on his or her own efforts to make a profit (that is, he or she will be an active participant in the LLC), that person's ownership interest in the company will not usually be treated as a security.

If your LLC's membership interests are considered securities, you must get an exemption from the state and federal securities laws before the initial owners of your LLC invest their money. If you don't qualify for an exemption to the securities laws, you must register the sale of your LLC's ownership interests with the U.S. Securities and Exchange Commission (SEC) and with your state.

Fortunately, smaller LLCs usually qualify for securities law exemptions. For example, SEC rules exempt the private sale of securities from registration if all owners reside in one state and all sales are made within the state; this is called the "intrastate offering" exemption.

Another federal exemption covers "private offerings." A private offering is an unadvertised sale that is limited to a small number of people (35 or fewer) or to those who, because of their net worth or income earning capacity, can reasonably be expected to be able to take care of themselves in the investment process. Most states have enacted their own versions of these popular federal exemptions.

Securities exemptions may be an area where you'd like to get the opinion of a professional. If so, Nolo can help connect you with a lawyer. Nolo's Lawyer Directory provides a comprehensive profile for each lawyer listed, including the lawyer's experience, education, fees, and general philosophy of practicing law. Profiles of attorneys in your state can be found at www.nolo.com.

Does forming an LLC mean I don't need a business license?

Forming an LLC does not take the place of obtaining a business license, tax registration certificate, or other required business permits. An LLC merely creates an ownership setup that limits the owners' personal liability. For more information on required licenses and permits, see the Licenses & Permits area of Nolo's website.

How can an LLC be ended after it has been formed?

Like a corporation, an LLC is meant to be a permanent legal entity, and it will exist -- and incur taxes and fees, whether or not you are actively operating a business -- until you take legal steps to dissolve it. If you decide to discontinue business as an LLC, you must file a certificate of cancellation and possibly a certificate of dissolution with the Secretary of State. For specifics, see the Secretary of State's website at http://www.sunbiz.org/. For general information on closing a business, read the article Closing Your Business: What You Need to Do on Nolo's website.

What happens after I pay?

Note: You will receive a confirmation email that includes the following information.

Your articles of organization will be generated and filed with the Secretary of State. Turnaround times vary according to the package you choose.

If you ordered Nolo's Express Premiere Service, your LLC records binder and company seal will be sent to you independently, directly from the manufacturer.

As soon as your filing is complete, we will ship your final LLC package, which has your customized operating agreement and instructions on a few more steps you need to take, including holding an initial meeting of your members or managers and sending your annual report to the Secretary of State.

After completing your purchase, you may no longer go back and change your answers because your order is being processed. You may, however, view your answers by signing in to Nolo's Online Legal Forms at https://nolonow.nolo.com/noe/index.php. going to Your Home Page, and clicking "edit" under Florida LLC. Then click "View Your Answers."

Once we send your documents to the Secretary of State, we cannot refund your state filing fees and other third-party costs, such as courier and delivery services, should you decide to cancel your order. If you have questions, please let us know here .

What if I want to change something in my LLC interview or documents?

You have 90 days to work on your LLC formation documents without purchasing them. Every time you work on your LLC formation through Nolo's Online Legal Forms, your answers are automatically saved in the system.

After completing your purchase, you may no longer go back and change your answers because your order is being processed. You may, however, view your answers by signing in to Nolo's Online Legal Forms at https://nolonow.nolo.com/noe/index.php. going to Your Home Page, and clicking "edit" under Florida LLC. Then click "View Your Answers."

Nolo's Online Legal Forms will store your personal information for one year after you pay for your LLC formation.

Where can I learn more about LLCs?

To learn more about limited liability companies, visit the Limited Liability Company area of Nolo's website or read Nolo's Quick LLC: All You Need to Know About Limited Liability Companies . by Anthony Mancuso.

Source: nolonow.nolo.com

Category: Taxes

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