Small businesses support an estimated 43.5% of Florida's $1 trillion economy. Florida is projected to grow to 26 million residents by 2030, up from the 21.6 million who call the state home in 2021. Small businesses — the backbone of the state's economy — will provide the vast majority of the 1.5 million new net jobs that will be created with this growth.
With its low tax burden — Florida ranks fourth on the Tax Foundation's State Business Tax Climate Index for 2021 — and great quality of life, it is no wonder that Florida is attractive to many small business entrepreneurs.
If you are an aspiring small business owner looking for information on how to start your new business enterprise in Florida, this guide is for you. The following covers what you need to know to plan for and establish your new small business in the Sunshine State.
Choose a Business Name
Many entrepreneurs come up with a business name at the same time they develop the idea for their new small business. Others spend time and even hire talent to come up with a moniker that markets their products and conveys their branding.
There is more to selecting a name than just finding a way to frame your business or catch the attention of customers and clients. Certain types of business entities require the name to reflect the legal structure — Florida requires that Limited Liability Companies use LLC in the name, for example — and some may already be taken or be indistinguishable from a business name that is already in use in the state.
Before committing to a name, check with the Florida Division of Corporations to determine if your preferred business name is already in use. If you plan to operate under a fictitious name — one other than that on your business filings — you will need to file for a "doing business as" (DBA) designation after confirming with the state of Florida through its sunbiz fictitious name database that the name is not already in use.
Once you settle on an available business name, you can register your business if you choose to. If you use a fictitious name, you are required to register it with the state. You will also want to reserve a domain under your business name to use with your business website and other branding and marketing initiatives.
Write Up Your Business Plan
Before you move forward with establishing your business presence in Florida, it is a good idea to create a business plan. Not only will a business plan help as you formulate business ideas and set the trajectory for your operations but it can also be a great fundraising tool that lends legitimacy to your business. Lenders, investors, potential partners, and even customers are more likely to buy into your business dream if you convert it to a clear plan on paper.
Typically, a business plan will include:
- A description of the company and its organizational structure
- A description of your services or products
- Information about your business location
- Some type of market analysis that covers your competitive advantages
- A list of your business resources
- A blueprint for funding
- A start-up budget
- Financial goals and projections
- Your sales and marketing plan
The heart of your business plan — especially when it comes time to seek business credit and funding from investors and lenders — will be a demonstration of your ability to manage the financial aspects of your business. Having accounting software and business templates at the ready will demonstrate your commitment to running a smooth and financially tight operation to stakeholders.
Choose a Business Structure
Choosing the right structure for your business is extremely important from tax, recordkeeping, and personal liability standpoints. Florida does not impose income taxes on residents, although corporations could be subject to a state income tax. Many people choose to open their businesses in Florida because it is a tax-friendly state.
It is important to understand tax and liability consequences of the different types of legal structures for your business.
- Sole proprietorship. With a sole proprietorship, you run your unincorporated business as an individual with no distinction between you and the business. That means that not only do you get to keep all of the profits but all of the losses and liabilities are also your personal responsibility. Business income and liabilities are filed on your individual income tax return.
- A partnership. You can form either a general or a limited partnership depending on whether all partners will share equally in the partnership or not. With general partnerships, all partners can actively manage or control the business unless the partners agree otherwise. Limited partnerships, on the other hand, require the partners to enter into a partnership operating agreement where the limited partners are investors with no authority to run the business and with limited liabilities. Like sole proprietors, partners report business income on their federal tax returns. Limited partnerships are required to register with the Florida Department of State, Division of Corporations.
- Limited Liability Company (LLC). LLCs combine some of the elements of partnerships and of corporations. Owners of Florida LLCs handle taxes on their personal returns like they would for a sole proprietorship or partnership. In addition, they get to take advantage of the limited liability that comes with incorporating. All LLCs must file articles of organization with Florida's Division of Corporations.
- Corporation (Subchapters C and S). Corporations are legal entities with the right to enter into contracts, own assets, loan and borrow money, and sue or defend a lawsuit. All corporations must file articles of incorporation with the Florida Division of Corporations. C-Corporations pay taxes — Florida's 2021 corporate income tax rate is just below 4.5% — and assume all liabilities. With S-Corporations, up to 75 shareholders can report shared income and expenses on their individual income tax returns.
Obtain a Federal Employer Identification Number
If you are running your business as a sole proprietor, you will file taxes and can operate your business using your Social Security number. However, you will need to apply for a federal employer identification number — also referred to as an EIN or a business tax ID — if your business meets any of the legal criteria, including:
- You hire employees
- You operate under a partnership or corporate business structure
- You are required to pay federal or state taxes as a business entity
- You have a business that uses a Keogh plan, a type of tax-deferred pension plan available to unincorporated businesses and self-employed individuals
- Your business works with specific types of organizations, including nonprofit organizations, farmers' cooperatives, real estate mortgage investment conduits, estates, and certain types of trusts
Even if you aren't required by law to get an EIN, you will need to get one if you plan to open a business bank account, enter into business contracts, or conduct any other business in the company's name. You can obtain a federal tax identification number online.
Additional Florida Business Requirements
Small Florida businesses must register for state identification numbers, permits, or licenses for the taxes that correspond with their specific services. For example, Florida may collect the following taxes from you or your business, when applicable:
Depending on the nature of your business, additional taxes — such as the communications services tax, fuel tax, documentary stamp tax, pollutants tax, and solid waste fees — may also apply.
You may be required to obtain certain business licenses before you can operate your business in Florida. The Florida Department of Business & Professional Regulations (DBPR) oversees licenses for many types of businesses and professions. You should consult the DBPR portal to determine whether your business requires a license to operate in Florida.
In addition, your local city or county governments may require a special type of permit to operate certain types of businesses or engage in specific activities. Examples include:
- A building permit
- A health permit
- An occupational permit
- A permit for signage
- A zoning permit
You will need to consult with your local government websites to determine what additional licenses or permits are required for your business in your location.
Florida Business Insurance Considerations
Although forming a corporation or an LLC might provide some protection from personal liability, you will want to consider business insurance to protect your business assets and, in the case of sole proprietors and general partners, your personal assets in the event you or your business are sued or incur loss or damages. The U.S. Small Business Administration (SBA) recommends that small business owners consider the following, as appropriate:
- General liability insurance to protect you and your business against financial liability as a result of bodily injury, property damage, and libel or slander
- Product liability insurance to protect you if you are a manufacturer, wholesaler, or distributor with exposure to financial loss should a product prove defective and cause injury
- Professional liability insurance for protection against loss from errors and negligence
- Commercial property insurance to protect your business from loss or damage to property due to weather and environmental factors and vandalism
- Home-based business insurance as a supplement to your homeowners insurance to protect your equipment as well as provide additional liability insurance against third-party injuries
- Workers' compensation insurance, which most employers are required to carry under Florida law
Skynova Accounting Software and Business Templates Can Help
Starting your own business should be an exciting undertaking. Don't let the recordkeeping and accounting aspects of your day-to-day operations bog you down. Whether you are a new business owner establishing an accounting system for the first time and/or putting together templates for project bids, purchase orders, bills of material, or invoices, Skynova's accounting software and business products will help you run your business efficiently while keeping your financial reports accurate and on track.
Sign up for free and see how Skynova can help your small Florida business thrive.
Notice to the Reader
The content within this article is meant to provide general information and may not apply to your specific situation. You are encouraged to consult with legal counsel and accounting and tax professionals when making determinations regarding business structure, tax matters, and other vital business considerations.