(Newswire.net — August 17, 2020) —
Should you start a single-member or multi-member LLC in Florida, or should you opt for the S-corp or C-corp tax structure to help you avoid paying LLC taxes? Continue reading to learn more about how LLCs are taxed in Florida.
With regards to paying taxes, single-member LLCs are treated like sole proprietorships and multi-member LLCs like partnerships, unless you choose to be taxed as a corporation. The IRS considers single-member LLCs as “disregarded entities” and multi-member LLCs as general partnerships, both of which are tax designations subject to pass-through taxation. Your LLC will not be required to pay corporate taxes, instead your LLC’s profits will pass onto you or its members, and those profits reported on your personal tax return will be taxed at each member’s individual rate. In other words, due to the IRS’ default designations for LLCs, by forming either a single- or multi-member LLC can avoid double taxation. As a single-member LLC, you report your LLC’s profit on your personal tax return, and as a multi-member LLC, the profits of your LLC will also, once distributed amongst its members, be reported on their individual tax returns. Either type of LLC will allow you to avoid double taxation.
LLCs can also be treated as a corporation for the sake of federal tax purposes. While forming your LLC in Florida, you can also elect to be taxed as a corporation by choosing either the C-corp or S-corp tax designation for your LLC. People usually opt for the S-corp designation because they are also considered a pass-through entity and deemed as a one of the “disregarded entities” by the IRS. On the other hand, people opt for the C-corp designation specifically to avoid self-employment taxes and also to gain potential tax reductions. (possible double taxation because your LLC is a separate entity and eligible for taxation. However if you choose the C-corp tax designation you will be at risk of facing double taxation. Your LLC’s profits will first be taxed as a corporation, and once profits are distributed among members, the profits are taxed again when members report their income share or profit dividends on their personal tax return.
So all in all, your LLC’s taxes will depend on the tax structure you chose when forming your LLC and every option and tax designation discussed above have their own tax advantages and methods of avoiding and minimizing your LLC taxes. So the main things you need to think about is being eligible for pass-through taxation treatment, and by default your LLC will be, and also avoiding double taxation, which you can do by forming a single- or multi-member LLC, or by opting for the S-corp tax designation.
State taxes in Florida
There are however some taxes you simply just cannot avoid. In the State of Florida, the IRS enforces certain state taxes that your LLC will be required to pay. To mention a few, you will be required to pay Sales Tax and register for a seller’s permit if your LLC is involved in the exchange of taxable goods and services. If your LLC has employees in the State of Florida, you may also be required to register for Florida Reemployment Tax, a type of unemployment tax, through the Florida Department of Revenue. In Florida, unlike several other US states, you are not required to pay Withholding Taxes, but will be required to pay federal withholding tax. You will also be required to pay certain industry taxes depending on the specific industry of your LLC. In Florida, specific industries may enforce additional state taxes so that is something to watch out for when forming your LLC. For more information on how the specific industries are taxed in Florida, you can visit the Florida Department of Revenue website.
Setting up an LLC is no easy task but you don’t have to do it alone; the more you learn the better and TRUiC can help you. To learn even more about how LLCs are taxed in Florida, or for any other information you want to know about starting an LLC in Florida, visit their site today and get your LLC started.