An LLC can be an S-Corp in Florida. An S-Corporation is a tax classification, not a corporate entity. It may lead to financial savings. S-Corporations are similar to LLCs, except the IRS recognizes them as corporations for tax purposes. Limited liability can protect personal assets if a business is sued or can’t pay debts. Other Florida LLC benefits include pass-through taxation.
Key Differences between LLC and S-Corp
One difference between an LLC and an S Corp is employment tax. As the LLC owner is self-employed, they pay employment tax to Medicare and Social Security. In an LLC the entire net income is considered when calculating employment tax.
Three steps to follow when starting a business:
- First, make sure your LLC name is unique by searching existing Florida businesses.
- Second, know Florida’s naming rules so your LLC gets approved.
If you plan to start a business in Florida, choosing the structure maximizes earning potential. By forming an S corporation in Florida, you can set up your business to save on taxes. This guide will walk through forming a Florida S corp and provide compliance tips. You can use a service like Northwest to form your S corp quickly.
LLC to S-Corp Conversion
Within two months and 15 days of starting a business, a newly formed LLC can file an election to be taxed as an S-corporation. In some cases, an LLC can still take advantage of S-corp taxation after filing the election form late. To decide on the timing, converting an LLC to an S-corp, and preparing LLC as S-corp taxes, a tax professional can provide advice. Before deciding, get legal, financial, and tax advice and analyze the numbers.
An LLC remains an LLC but can choose S-Corp taxation with the IRS. In an S-Corp, income passes directly through to shareholders without being taxed as corporate income. A corporation or LLC can be an S-Corp if it has 100 or less shareholders. Shareholders pay pass-through taxes at their personal rates. S-corps can only have individuals, certain trusts/estates, or specific tax-exempt groups as shareholders.
Business owners should evaluate whether an LLC or S-corp better suits their operations and income taxes. To change an LLC to an S-Corporation, the business must file with the state agency governing corporate filings to officially convert. Confirm the LLC qualifies for S-corp status.
Evaluating LLC and S-Corp Advantages
Why choose LLC tax status instead of incorporating as an S-Corp? S-corps typically have stricter company regulations than LLCs, such as required meetings, minutes, bylaws, stock transfers, etc. Also, while an LLC has flexibility in membership and voting rights, S-corp voting rights depend on financial stake. Your business may also need corporate bylaws, a board, and shareholder meetings, adding costs.
Many small businesses start as LLCs because they’re flexible with minimal state requirements. LLCs can choose S-corp election and keep their management structure while gaining tax perks. To elect S-corp taxes, your business must meet specific eligibility rules.
LLCs offer liability protection so creditors can’t pursue owners’ personal assets. LLCs allow protection without the regulatory requirements of corporations. They are taxed as partnerships or sole proprietorships by default but can opt for S-corp election.
Fees and Process
What is the difference between a registered agent and the business physical address for an LLC or S-Corp in Florida? A registered agent in Florida is responsible for receiving legal documents, while the business physical address is where the company operates.
To convert your LLC to an S corp, your business must meet the IRS requirements for S-Corp eligibility. These include being a domestic business and having allowable shareholders such as individuals, certain trusts, and estates.