Florida LLC Taxes

It is a common misunderstanding when forming an LLC that it would be wise to do so in a state without income tax. The idea is that you would save money on annual taxes. In reality, however, LLCs typically have pass-through taxation. Because of that, you are unlikely to see tax benefits by forming in a state without income tax, meaning there is no reason not to form in Florida.

Pass-through taxation essentially means that the earnings from the company “pass through” and end up on your own personal income taxes. So, even if you established your LLC in a state without income tax, the profits would end up being taxed on your personal taxes in Florida. In other words, the biggest factor for the LLC taxation rules is the location you live in.

In cases where you do decide that S Corp taxation makes more sense for your business, there is a specific process to change the classification. When you apply for the EIN, you will receive the IRS default classification based on your type of LLC. Within 75 days following receipt of your EIN, you can submit one of two forms to change your tax classification and take advantage of it being retroactive. If you submit the forms after this point, the change will not apply retroactively. Do not take the decision to switch classifications lightly as you can only do so one time every five years.

Those who want to receive the taxation classification of an S Corp will submit form 2553. Those seeking another classification will submit form 8832. The same company that helped you file the relevant documents to create your LLC should be able to assist you with this filing as well.

As mentioned, it is a smart decision to consult an accountant or tax professional for assistance with your LLC taxes and K-1 report submission. This will help you avoid costly mistakes.