People are moving their businesses to Florida more than ever before and the state is poised to keep growing, despite the pandemic. Here are 5 things you need to know.
Florida has seen the highest influx of new residents over the last decade with a population increase of 14.6%, double the rate of overall U.S population growth– and the pandemic has accelerated this. With the adoption of the work-from-home model, employees and businesses understand that they can do their job virtually anywhere.
With places like Tampa Bay and Miami emerging as new hubs for technology, Florida is becoming a hotspot for businesses in the financial and banking industry. Even large corporations are beginning to understand that with the ability to work from home, they are no longer tied to conducting business in larger hubs like Silicon Valley and New York City.
Florida’s largest metro areas like Tampa Bay are seeing some of the largest population gains in the country. According to the latest LinkedIn migration analysis, Tampa showed a 5.7% growth in LinkedIn members who listed the city as their location. [1]
Why are people moving their business to Florida?
Business and even larger corporations are moving their ventures to Florida for a few reasons– One of them is the appealing tax codes. A big advantage of relocating a small business to Florida is the business pays less in taxes here, than perhaps anywhere in the United States. Take a quick look at the State of Florida Tax Guide.
Moreover, individuals in Florida are not subject to state income taxes. This means a business owner in Florida is not taxed on income that passes through from their small business to themselves at the state level. Additionally, LLCs, sole proprietorships and S corporations are also exempt from paying state income tax.
In comparison to most states, Florida’s corporate taxes are still modest. The statutory corporate tax rate in Florida is 5.5 percent on federal taxable income, however exclusions can drastically reduce a corporation’s effective tax rate. A corporation must pay either the higher of the regular rate minus all exemptions and credits, or a 3.3 percent alternative minimum tax rate.
S-Corps
Many small business owners in Florida choose to form their businesses as S corporations, which have many of the same legal protections as C corporations but are exempt from the state’s 5.5 percent corporate tax.
LLC’s
LLCs are pass-through businesses that protect its owners from legal and financial problems. Most, but not all, LLCs are classed as partnerships or disregarded companies for tax reasons. Because an LLC is not a corporation, it does not have to pay state income tax in Florida.
Except for those that are incorporated, LLCs are exempt from state income tax, and their owners do not owe any tax to the state of Florida on the personal income they get from their enterprises. It is highly suggested as a minimum step for small business owners who seek basic protection of their personal assets while keeping their zero state income tax burden to form an LLC in Florida.
Sole Proprietorships
Sole proprietorships are like partnerships in that the business income is allocated to one individual who is the sole business owner, rather than to several partners. For federal income tax reasons, this money is treated as ordinary personal income, and the business owner is taxed on it at ordinary income tax rates.
In Florida, earnings distributed through a sole proprietorship are treated as ordinary personal income, which is not taxed. Because the company is not a corporation, it is not subject to state income taxes, hence the owner is exempt from paying them.
Partnerships
General partnerships, limited partnerships (LPs), and limited liability partnerships are all examples of business partnerships. Partnerships are not liable to state income tax in Florida, regardless of their designation.
Profits from partnerships are allocated to the business’s partners. They pay ordinary income tax rates on this money, just like they do on money earned from a W-2. Small business owners in Florida whose enterprises are categorized as partnerships are totally insulated from state income tax because the state does not levy a tax on ordinary income.
Now that you understand Florida’s business-centric tax code, let’s discuss some things one should know before taking business to the Sunshine State.
Here are 5 Things to Ask Yourself
- Florida’s tax codes cater to small businesses, but also provide modest rates for larger corporations. To reiterate, a corporation must pay either the higher of the regular rate minus all exemptions and credits, or a 3.3 percent alternative minimum tax rate. Is it right for your business to move to Florida?
- What type of work talent are you looking for and where do you want/need them to be?
- Have you considered operational costs?
- Have you secured office space?
- What are some of the tailored incentives you can provide to your employees in Florida?
There are hundreds of reasons why people are moving to Florida. From tax codes, to weather, to better quality of life, business owners from around the U.S and beyond are helping the Sunshine State transform into a hub for investors, shareholders, and business owners. Just make sure you have the connections and tools to be successful before you do! Keeping your legal and intellectual property services local is one of the things we recommend here at Stanton IP Law Firm. If you need to protect your Intellectual Property or have other business legal needs, we are here to help!
Are you moving your business to Florida? Stanton IP Law Firm takes pride in helping Florida businesses and beyond secure the rights to their intellectual property. Call us today at 813.421.3883 or shoot us an email to [email protected].
[1] https://www.axios.com/florida-migration-gains-pandemic-4ade6fc2-1b5f-4a56-b126-ef53cd65b841.html
