LLC vs S-Corp in Florida

Florida has no personal state income tax, which changes the LLC vs S-corp math for a trade business. The Florida Division of Corporations (Sunbiz) handles the entity filing. The IRS handles the tax classification via Form 8832 and Form 2553. A Florida LLC can elect to be taxed as an S corporation. Florida LLC basics. - Articles of Organization filed with the Florida Division of Corporations (Sunbiz). - Filing fee is $100.00 plus a required $25.00 registered agent designation fee, for a total of $125.00. - Annual report required every year by May 1. The annual report fee is $138.75 for an LLC if filed on time. A late annual report fee of $538.75 applies after May 1. - Single-member LLCs default to disregarded entity for federal tax. Multi-member LLCs default to partnership tax. Either can elect S corp treatment with Form 2553. Florida S corp basics. - An S corporation elected under federal law is generally not subject to Florida corporate income tax, because Florida follows the federal pass-through treatment. A Florida S corp still files Florida Form F-1120 if it has any federal taxable income that must be reported, including built-in gains. - Florida's corporate income tax applies primarily to C corporations doing business in Florida. S corps that have no items subject to Florida corporate income tax generally do not owe. - Payroll. An S corp must pay its owner-employee a reasonable W-2 salary. Florida has state unemployment tax (reemployment tax) through the Department of Revenue, which applies once the business crosses the tax threshold. Why a Florida trades shop might still elect S corp. The main reason in Florida is federal self-employment tax savings. A disregarded-entity LLC owner pays self-employment tax on the full net profit. An S corp owner-employee pays payroll tax on wages only; the distribution portion avoids self-employment tax. Florida's lack of state income tax does not change this federal calculation. Rule of thumb. Start as a Florida LLC. When annual profit after a reasonable owner wage is high enough that payroll tax savings clear the payroll, retirement plan, and accounting costs, elect S corp. A CPA with Florida construction clients can run the breakeven for your numbers and confirm the Florida annual filings.