What Taxes Does an LLC Pay in Florida?
Florida is one of the most tax-friendly states for LLCs. If you are an owner of an LLC in Florida or are planning to open a new LLC in Florida you must know the taxes that an LLC pays in Florida.
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Did you know that Florida is a very tax-friendly state for LLCs? So, if you have an LLC or are planning to open up an LLC, you should know that even though Florida is a tax-friendly state for LCS, there are some state taxes that your LLC is going to have to pay in the state of Florida. That’s what we’re going to talk about in this video. Hello from Freedom Tax Accounting are an accounting firm where we have been providing quality tax and accounting services now for over 20 years. If you’re new to this channel, we provide strategies for small business owners, so they can achieve their financial goals. If that’s a topic that you like, please subscribe to our channel.
Now in this video, we’re going to give you a class on the different types of taxes that LLC s do have to pay in the state of Florida. Okay, now, if you’re planning on opening up an LLC in Florida, we always recommend that you take a consultation first, because the pending on your case, there are several legal and there are several tax structures available for you. And you should talk to a tax professional or a legal professional. So, you know that you’re getting the best tax and legal structure for your business. Here at Freedom Tax, we do provide that consultation. So, if you’re interested in opening up a business in the state of Florida, please contact us, visit our website at freedom tax, FL com, schedule your initial consultation, and we will evaluate your case and provide assistance in designing the best legal and tax structure for your specific case.
Now, as mentioned, Florida is a very, very tax-friendly state for small businesses. But you do need to be aware that there are some taxes that your LLC is going to pay in the state of Florida now in every state, not only Florida. So, if you open up an LLC, in any of the US states, not only Florida, you have to keep in mind that there are three main government agencies that you may have to report taxes to.
Number one, that is the federal government meaning the IRS. So, no matter in which state you open up an LLC, you will always have to report taxes at a federal level to the IRS. There’s also the state level, depending on the state that you operate your business, you may have state taxes, and you may not have state taxes. Also, there are some counties depending on the county that your LLC is located in, you may even have to pay county-based taxes or reporting. So, you should work with a local CPA or a professional to let you know exactly what taxes or reporting your business has, depending on the state and county that your business operates in.
Now, in terms of LLC, federal taxes, because in this video, we’re only going to concentrate on Florida state taxes. But every LLC has to file and report its federal tax return. We did a video called the Five Ways an LLC can File Taxes. So, if you want detailed information on how your LLC files taxes in front of the IRS, this is the video that you should look at, look at our playlist. Watch it because you’re going to get very good information on how your LLC pays taxes on a federal level.
Okay, now, let’s go into taxes in Florida. Alright, so in the state of Florida, there is no state income tax on individuals. So, Florida, Florida does not have a state income tax for individuals. Okay. And that’s very important because you’re going to see how that affects your LLC taxes. Okay. But Florida Yes does have a sales tax. Okay. There are some states that don’t have a sales tax, but Florida does have a state sales tax, which right now is 6%. But we’re going to give you more details later on in this video. Florida does have a state income tax on corporations. Now you may say, well, I don’t have a corporation, I have an LLC. But remember, your LLC may file taxes as a corporation, so your LLC may pay corporate taxes. And we’re going to go more into that detail further along in this video. Okay, and Florida Yes, does have state property taxes.
Now, if you’re an LLC that is using the LLC to buy a rental property, real estate, then your LLC will be subject to state property taxes, which we will go into detail later on in this video. Okay. Now, depending on your LLC tax structure, that will affect the type of taxes that your LLC is going to pay in the state of Florida. Okay, why when you open up an LLC, as with one owner, okay, so if you open up an LLC with only one owner, the IRS gives an automatic designation for taxes saying that that LLC is going to file taxes as a sole proprietorship. So, your LLC is going to file taxes under Schedule C, or Schedule E, if it’s rental income, but even though that the sole proprietor is the automatic designation for taxes, your LLC has the capacity, you can tell the IRS that you want your LLC to pay taxes as an S Corp. Or as a C Corp. Alright, so that’s if your LLC has one owner, single-member LLC. But if your LLC has two or more owners, the IRS automatically says that your LLC is going to file taxes as a partnership under form 1065. And you have the same election capacity, you can tell the IRS that you want your partnership to file as an S Corp. Or as a C Corp. Okay, S Corp file under form 1120 s and C corpse file under 1120. So, your LLC can file taxes. One as a Schedule C two as a Schedule II, three, as an S Corp. For as a C Corp, or 5 as a partnership. So, your LLC can file taxes in five different ways. And remember the video that I told you to see this one, the five ways an LLC can file taxes, we go into detail about how each tax structure affects your taxes. Okay, but that’s not the topic in this video right now.
So, depending on how your LLC files taxes, it will affect the taxes your LLC pays in Florida. So, let’s take the first-way Schedule C. Okay, the Schedule C, the net profit gets reported inside your personal tax return which is form 1040. And the net profit of the Schedule C no state tax. Okay. So, on Schedule C, your net profit gets reported on your personal tax return and since you are that personal income now, then you pay no state taxes on the net profit of your LLC. You do pay federal taxes but you do not pay state income tax. If you file under Schedule E as rental income for under real estate. Your net profit also gets reported on your personal tax return form 1040. So now this is individual income. So, no state tax, no state income tax. Okay. You do pay federal tax but you do not pay state income tax. If your LLC files as a partnership form 1065 the net profit of the partnership also get reported on the owners of the partnership personal tax return, meaning no state tax, either. Okay. Once again, you do pay federal tax but no state income tax.
Now, if your LLC files as an S corporation, which is a very popular option for LCS, the net profit of the S corporation also gets reported on the owner’s personal tax return form 1040, meaning that the S corporation has no state income tax. Okay, so that if your LLC files, Schedule A, Schedule C, Schedule E 1065 partnership, and 1120 S corporation, your LLC will pay no state income tax from the net profit reports.
Now, if your business files as 1120, which is a C Corp. Right, meaning that your LLC files taxes as a corporation, your LLC legally is an LLC, but for tax purposes as a corporation. Now, this is different because their net profit of 1120 is not reported on the owner’s personal tax return. So then net profit of your LLC, if it files under 1120. Yes, it is the subject. Yes, it pays state corporate tax. Okay, which will give you more details after this slide. Okay. So, if your LLC pays taxes, filed taxes under form 1120, it is taxed as a corporation, Florida, yes has state corporate taxes.
Okay. Now, this is the Florida corporate tax rate. Now the good thing about the corporate tax rate is that the first $50,000 in net profit is exempt from corporate income tax. So, let’s say that your LLC has a net profit of $70,000. The first $50,000 don’t pay the corporate tax rate. So, you only pay taxes from $20,000. Because $20,000 is the difference over $50,000 if your LLC has a $70,000 net profit at the end of the year, okay? So that’s very good because the first $50,000 net profit, not gross income, and net profit is exempt from corporate income tax.
Now, until 2019, so any corporate tax from 2015 1617 until 2018, the corporate tax rate is 5.5%. From 2019 to 2021, then the corporate tax rate is 4.458%. And from 2022 forward, the corporate tax rate is 5.5%. So, that’s how the corporate tax rate works in the state of Florida. Okay, but remember, your LLC will only pay corporate taxes if it files taxes on their form 1120, which is you have converted the tax filing requirement of your LLC as a corporation. Now, another tax that your LLC may have to pay is the Florida sales tax. Okay.
Now, most services don’t have to charge sales tax to their clients. For example, if you do consult, accounting, bookkeeping, services, okay. Those services don’t require that you charge your client’s sales tax. But if you sell tangible products and other services in more detail.
But mostly if you sell tangible products, if you have a store, if you sell equipment, if you sell products online, you are selling a tangible product. And then yes, you have to charge sales tax to your customers. Now Florida has a flat state sales tax of 6%. But depending on the county that your business is in, the county may have an additional sales tax. For example, here where our offices at Osceola County in Florida. Osceola County sales tax is 1.5%. So, businesses in Osceola County in Florida that sell tangible products need to charge their clients 6% plus 1.5%, the county tax for a total of 7.5% sales tax. Okay, so depending on the county that your business is located at, then you may have to charge your customers additional county sales tax.
Now, in theory, your LLC doesn’t pay this tax, because remember, the sales tax is something that you are charging your customer, your customer is the one paying the sales tax, but that money is going into your business bank account, but you then have to pay that to the state. So, technically, your business is not paying the sales tax is just that you’re collecting from your clients, and you’re then providing that payment over to the state. Okay.
Now, sales tax has very different rules. Depending on the type of business you have pending on what your business does, your business may have to charge sales tax, or it may not have to charge sales tax. For that, you can consult the Florida Department of Revenue website, which is Florida revenue calm, or you can call our office to schedule an initial consultation. And in that consultation, we will determine if your business does have to pay sales tax in the state of Florida. Okay. Now, the last tax that your LLC may have to pay is property taxes. So, if your LLC has real estate, right, if your LLC owns a building, or if your LLC buys real estate properties for rental income, then properties in Florida do pay for property tax.
Now depending on the location of the property, the property does have different property taxes. Now, on average, Florida’s average real estate property tax rate is zero point 98% which is lower than the US average which is 1.8%. Okay, so once again, Florida is once again, a very tax-friendly state for LLCs. So basically, those are the taxes that your LLC needs to keep in mind when operating in the state of Florida. Remember that if you want a consultation about the LLC that you already created, or if you want to open up a new LLC in the state of Florida, we always recommend that you have a consultation with a professional so they can study your specific case. So, you make sure that you have the best tax and legal structure for your business. This is our contact information. So, you can schedule your initial consultation.
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