Starting a business in Florida can be a smart move as there is no state income tax and relatively low property taxes. The warm seasons all year round make it a popular place 365 days a year, and the Gross Domestic Product (GDP) was around $1 trillion in 2020, making Florida the fourth-largest economy in the United States according to the Bureau of Economic Analysis.
While starting a new business is always challenging, the “Sunshine State” is definitely a promising place to invest. Here are some legal and financial steps to take to be successful in starting your company in Florida.
Choose Your Entity Type
One of the first and most important decisions you need to make is choosing the name of your company and especially the type of entity: DBA, corporation, or LLC. The decision will influence what and how many taxes you pay annually, so it’s important to understand the difference between each:
- Doing Business As (DBA)– A company is “doing business as” when it operates under a different name than the one under which it’s legally registered. You have this option when registering your business as a sole proprietorship or partnership. A sole proprietorship is a small company formed by an individual and it’s not legally separated from the owner (income and losses are taxed on the owner’s personal income tax return). Partnerships are formed by two or more owners who share the management and profits of the business.
- Corporation– If you want to register your business as a corporation you will need to choose between one of the different types, although the most common for small businesses is Corporation S (or S Corp). A corporation exists as a separate entity, which allows its shareholders to keep their personal assets protected from corporate liabilities.
- Limited Liability Company (LLC)– Some states allow a business to form what is called a limited liability company. Florida is one of them. An LLC has the benefits of corporations, sole proprietorships, and partnerships while protecting the owner from personal liability for the business’s debts.
Register Your Business
There are federal, state, and local regulations that you will need to be aware of to operate your new business legally, and this generally includes obtaining some business licenses and permits. You will also need to register your company with the Department of Revenue, the Internal Revenue Service (IRS), and the Department of State for tax purposes.
Be sure to understand the licensing for your specific business model as these are unique to different industries. If you intend to open a restaurant, for example, you will have to obtain a series of specific permits for this activity: foodservice license, health permits, liquor license, etc.
To find out about local permits, contact the official agencies in the area where you are starting your company.
Open a Business Bank Account
It is important to open a business bank account for your new company. Having a separate bank account from your personal one allows you to more easily track business expenses and make payments. You will need to have an Employer Identification Number (EIN), which is assigned when registering the company.
Keeping your personal and business income and expenses separate also makes it easier to pay taxes, as you’ll be able to better track business purchases and deposits with a different bank account. Be sure to keep track of all incoming and outgoing funds throughout the process especially when starting as some upfront costs can be hefty.
Opening a new business involves a series of risks, and it’s good to be prepared for unforeseen events such as work-related accidents or potential lawsuits for professional liability. Several types of insurance are important for small businesses. These are some of them:
- Workers Compensation– This is typically required in most states to help with medical bills and lost wages in the event of work-related injuries. In Florida, workers’ comp is mandatory for all businesses with four or more employees, but there are specific rules for some types of companies—construction businesses, for example, must have coverage for every employee.
- Professional Liability Insurance– Professional liability insurance in Florida is essential to protect small business owners from customers who claim that your company made a mistake while providing a service. This customer may sue you for negligence and, even if you haven’t done anything wrong, this insurance policy can help cover legal defense costs.
- Property Insurance– It’s good to have some kind of property insurance even if you rent the space, to help cover possible damage to equipment, inventory, and furniture in the event of a fire, flood, or theft. The state of Florida also has a history of wildfires, tropical storms, hurricanes, and floods, which can pose some risk especially if you are settling in the coast. As these natural events are generally not covered by standard policies, you’ll need to arrange adequate coverage.
- Commercial Auto Insurance– If your business will operate vehicles of any kind (delivery cars, trucks), you must insure them to protect the company and your employees in the event of accidents.
Get Up and Running
After solving the most bureaucratic steps, the fun finally begins. Find a location and begin the buildout, but be sure to have proper permits for any type of construction.
It is essential to study the peculiarities of each region of the state to know if you are opening your business in the right place. Create a business strategy that will target your clientele and set you apart from the competition. It might seem complicated at first, but focus more directly on finding opportunities to stand out.
Finally, hire employees that are ready to dive into this new business venture. Good planning is essential to avoid hiring more or fewer people than you need to, and don’t forget to provide adequate training for your new team.
A Future of Sunshine and Success
By 2020, 2.7 million companies in Florida were small businesses, representing 99.8 percent of all businesses in the state, and directly responsible for employing 3.5 million people (almost 42 percent of the state’s workforce).
Based on these numbers, what can go wrong when opening a new business in a sunny state that’s also considered one of the richest in the country, with many job opportunities and excellent per capita income? The answer is: many things. So pay attention to every little detail before going into operation, make sure you have all licenses and permits up to date and also adequate insurance coverage to protect the company from the unexpected.