Florida's Tax Rates For Small Businesses and Corporations

Florida is one of the most popular states to establish a business in due to its tax-friendly climate. It features no personal income tax, a significant benefit for entrepreneurs, and other tax advantages that make Florida an irresistible place to operate. While these positives are hard to ignore, it's important to understand how state taxes apply to your chosen business structure. Whether you operate as a limited liability company (LLC), S corporation, or C corporation, the way your Florida-based business is taxed will impact your long-term tax strategy.

If you're unsure where to start, don't worry, because you're not alone. We created this comprehensive guide to help you learn everything you should know about Florida's small business and corporate tax rates. This way, you can operate your business with confidence knowing that your taxes are in order. However, if you're at a stage where you've exhausted the effectiveness of doing your own tax work, professional accounting support is ready to ensure compliance and maximize deductions so you can focus on what you do best: growing your Florida business.

How Do Business Taxes in Florida Work?

Only C corporations pay state income tax in Florida. No other business entity has this requirement, including pass-through entities. Profits and losses pass through to owners, who then report their share on their individual federal income tax returns.

If you're one of the following types of corporations, you must file taxes in Florida. This includes business owners and corporations that earn income, corporations that operate in the state, and organizations with tax exemptions.

Florida Corporate Tax Rates

The corporate income tax rate in Florida is 5.5% and applies only to C corporations and LLCs that elect to be taxed as corporations.

How are C Corporations taxed in Florida?

Florida businesses operating as corporations must file tax Form F-1120 annually to report their income to public records, even if they don’t have taxes due.

You must calculate the Florida corporate income base and rate to determine how much you owe on your C corp business tax return. The tax base is an apportionment formula consisting of three factors:

• Payroll (25%)

• Property (25%)

• Sales (50%).

You’ll then add non-business income and subtract the $50,000 exemption to determine your net income.

Corporate Tax Credits in Florida

The current corporate income tax rate in Florida is 5.5%. Florida offers several corporate income tax incentives that will help your business reduce the amount owed, although eligibility varies. Potential incentives to consider include:

• Capital Investment Tax Credit

• Community Contribution Tax Credit

• Florida Alternative Minimum Tax Credit (AMT)

• New Markets Tax Credit

• Rural Job Tax Credit

Florida Tax Rates for LLCs

Like S corporations, Florida LLCs typically operate as pass-through entities. This means that if you start an LLC in Florida, the business won’t pay federal tax. LLCs have a few options regarding how they’ll pay Florida business taxes, which include:

• A Single-member LLC (disregarded entity)

• A Multi-member LLC, or

• An LLC electing corporate taxation

Disregarded entities in Florida don’t have to file a second Florida corporate income tax return. In this scenario, you would use the LLC owner’s return, whether your Florida LLC is owned directly or indirectly by a corporation.

A corporation that owns a single-member LLC must also file a Florida corporate income and franchise tax return to report its own income and the single-member LLC’s income, even if ownership of the LLC is the corporation’s sole business activity.

While uncommon, incorporated LLCs must pay state income taxes. In this situation, the income tax rate is either 3.3% (the alternative minimum tax) or 5.5%.

To file income taxes as an LLC classified as a corporation, you’ll complete a Florida corporate income/franchise tax return. LLCs classified as corporations will file Form F-1065 if one or more of their owners is a corporation. Any owner of this LLC type must also file a corporate income tax return.

How are S Corporations taxed in Florida?

Taxes for an S corporation are unique in Florida. Compared to a C corporation, which is subject to double taxation, S corps aren’t subject to federal income tax because they're pass-through entities.

Instead, the business will pass federal income tax onto the annual income tax return of each owner, called a shareholder. Individual federal income tax rates determine this amount; remember, Florida does not have a state income tax.

S corps allow owners to reduce their self-employment tax burden by splitting their income between a reasonable salary and tax-exempt distributions.

Partnership Business Taxes in Florida

You can choose from three partnership types in Florida, which are pass-through entities. Instead of the business paying taxes directly, federal income from the partnership passes through to each partner for reporting on their individual federal income tax returns.

• General partnership. A general partnership involves at least two people who own the business.

• Limited partnership. This type consists of two or more partners, who can be one or more general partners, who operate the partnership with unlimited liability, or one or more limited partners, who don’t operate the partnership and have limited liability.

• Limited liability partnership. Has two or more partners, but unlike a limited partnership, all partners are considered general partners who operate this type of partnership. Partners in a limited liability partnership have both limited and shared liability.

Sole Proprietorship Taxes in Florida

Sole proprietorships are perhaps the easiest business entity to form in Florida. This entity indicates that the small business owner will operate it solely.

As a result, sole proprietors must file and pay federal income taxes. However, their income is individual, not based on their business. The sole proprietor will then pay taxes based on an individual’s tax rate.

And because a sole proprietorship isn’t a corporation, a sole proprietor also won’t have to pay state taxes in Florida. Sole proprietors will use Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship), to report their income by the April 15th deadline.

Taxes for Multistate Businesses in Florida

If your Florida-based business operates in multiple states, you may also owe taxes in those states, which establishes an economic nexus. A nexus indicates you've exceeded the minimum requirement for state officials to collect tax from your out-of-state business. Nexus rules vary by region, so it's best to review them and weigh other multistate tax considerations before entering each market. The standard economic nexus threshold for sales tax is $100,000 in gross revenue or 200 transactions.

In addition to nexus considerations, given Florida's size and its proximity to other states in the panhandle region, you or your employees may encounter unusual tax situations. Scenarios include:

• You lived in two states during the same tax year.

• You work in another state but live in Florida.

• You work in Florida but live in another state.

Florida does not participate in reciprocity agreements, which ensure that out-of-state residents pay income tax only in their home state.

Other Florida State Taxes

There are other taxes business owners might be responsible for in the state of Florida, including:

• Sales tax. A 6% state sales tax is included in the price of taxable items or taxable services and collected from the purchaser at the time of sale.

• Use tax. A 6% use tax is due on using or consuming taxable goods or services when sales tax wasn't paid when purchased.

• Reemployment tax payments. Newer Florida-based employers pay the 2.7% Reemployment Tax, which is deposited into a trust fund. Rates vary for more experienced employers.

• Excise tax. Items, including gas, cigarettes, cell phones, and alcohol, are subject to this tax. Rates vary.

Local surtaxes can also apply across the state, which fund various projects. Discretionary sales surtax can increase the Florida sales tax rate to 7%.

Benefits of Having a Small Business in Florida

Establishing your small business in Florida offers numerous benefits. Florida's popularity has increased in recent years due to its favorable regulatory environment and the absence of a statewide income tax. Because of this, the economy and population continue to grow, buttressed by thriving tourism and service industries.

The state attracts qualified professionals who help maximize Florida's seasonal economy.

How to File Business Taxes in Florida

Take these steps to file your Florida business taxes.

1. Determine your business entity type. LLCs are pass-through entities, meaning they don't pay Florida corporate income taxes, but C corporations do.

2. Identify state tax obligations. These will vary by entity type and industry.

3. File required forms. C corporations will file Form F-1120, while pass-through entities are usually exempt from corporate income tax.

4. Maintain accurate bookkeeping. Ensure you always have a clear understanding of your business's financial health with accurate, regularly reconciled books.

While many Florida-based business owners start by doing their own taxes, professional tax support makes a significant difference. Dedicated accountants can manage compliance and filing deadlines throughout the year.

Visit Florida's Department of Revenue for additional information.

Work with the Professionals

Trying to understand Florida's ever-changing business taxes can be confusing, especially as your operations grow or expand across state lines. 1-800Accountant, a virtual accounting firm made for entrepreneurs, can help your Florida-based business stay compliant while reducing your tax burden.

1-800Accountant's advantages include:

• Accountants familiar with state and local tax laws in Florida

• Full-service small business support covering bookkeeping, tax preparation, entity formation, payroll, and advisory

• A technology-driven platform that simplifies financial management

• Scalable services as your business grows in Florida and across the country

This combination of expertise and accessibility makes it easier to manage finances while focusing on running your business in Florida.

Schedule a free 30-minute consultation with 1-800Accountant to learn more and get started.

FAQs About Florida Business Taxes

Do small businesses pay state income tax in Florida?
Small businesses operating as LLCs or other pass-through entities do not pay income tax in Florida. C corporations are subject to the 5.5% Florida corporate income tax. Professional guidance can help determine the optimal entity for your business operations.

What taxes do LLCs pay in Florida?
The taxes a Florida LLC pays depend on several factors. If the LLC sells taxable goods or services, it will be responsible for sales tax. If it has employees, it will be responsible for paying reemployment tax on wages. All Florida LLCs must file an annual report and pay a fee, currently $138.75.

What is the Florida corporate income tax rate?
The Florida corporate income tax rate is 5.5%. C corporations and LLCs taxed as corporations are subject to this tax. Pass-through entities typically avoid it.

Do online businesses need to collect Florida sales tax?
Online ecommerce businesses that sell to customers within Florida are responsible for collecting sales tax. If they sell through a platform like Amazon, it will usually collect and remit sales tax on behalf of marketplace sellers. Businesses must register with the Florida Department of Revenue to collect sales tax.

Do freelancers pay Florida state income tax?
No, freelancers and other self-employed professionals do not pay state income tax in Florida because it doesn't exist. However, they will be responsible for paying federal self-employment taxes, and may owe local taxes depending on the region. Freelancers expecting to owe $1,000 or more in taxes to the federal government during the year must also calculate and submit quarterly estimated tax payments.