How to Incorporate a Business Under Florida Law
A Florida corporation is a legal entity that stands separate from its owners. Corporations benefit owners by protecting their personal assets from business debts. Creditors and plaintiffs usually cannot reach the personal assets of business owners to satisfy judgments against a corporation. However, corporations are subject to what is sometimes known as “double taxation.” Corporations are taxed when they take in profits, and shareholders pay tax on any dividends or capital gains.
A corporation can be a C corporation or an S corporation. A C corporation is the more traditional of the two, while an S corporation somewhat avoids double taxation by “passing through” its profits to the individual tax returns of its owners. An organization that prioritizes control over “going public” may be structured as a close corporation. A close corporation (or “tightly held” corporation) is usually limited to a small number of shareholders and often restricts how stocks are sold or transferred. Close corporations work well for organizations such as family businesses.
Regardless of how an organization chooses to incorporate, it is important to follow all the steps of incorporation properly. The benefits and protections of the corporate structure, such as protection from liability, may not apply if a business is not properly incorporated.
1. Choosing a Name
An incorporator may name their Florida corporation almost anything so long as it is distinguishable, does not mislead the public, and contains the word “corporation,” “company,” “incorporated,” or an abbreviation of these words.
In Florida, a business’ name is distinguishable if it is different from the name of another entity on file. A name is not distinguishable if the only difference is a suffix, a definite or indefinite article, the word “and” or the symbol “&”, the singular, plural, or possessive form of a word, or a punctuation mark or symbol.
The corporation’s name also may not mislead the public. In Florida, this means that a corporation’s name may not state or imply a purpose other than its stated purpose in its Articles of Incorporation. It also cannot state or imply an unlawful purpose, or state or imply that the corporation is connected with a state or federal government agency, corporation, or entity.
It may be a good idea to also check if the web domain is available for purchase. A corporation operating under a name other than its legal name will need to file a Fictitious Name Registration. Finally, a registered name is not a trademark. Trademarks are registered with the U.S. Patent and Trademark Office or a state trademark office.
2. Choosing a Registered Agent
A business’ registered agent receives service of process, government correspondence, and compliance documents on behalf of the business. A registered agent can be an individual or an entity, but a corporation cannot be its own registered agent for service of process. However, a director or officer may serve as an agent. Some businesses, especially larger ones, prefer to employ a registered agent service. Regardless, Florida requires that a registered agent meet the following criteria:
- Is at least 18 years old
- Maintains a physical address in Florida
- Is available in person during normal business hours
3. Choosing Initial Directors
At least one director must oversee the corporation. A corporate director is responsible for the adoption, amendment, and repeal of operational bylaws and the election, supervision, and removal of officers.
During an organizational meeting, the incorporators should elect the board of directors, or the initial directors should appoint officers.
The initial corporate directors will serve on the board until the first annual shareholders meeting, at which board members are elected by the shareholders.
4. Choosing a Share Structure
In order to complete the Articles of Incorporation, incorporators and directors must choose a share structure. A share structure will include the number of shares that the corporation is allowed to issue (the authorized shares), the total number of shares actually issued to shareholders (the issued shares), and any share classes with defined rights and privileges.
Unlike some states, Florida does not dictate a par value, meaning a threshold value under which a stock cannot be sold. Instead, the board of directors may establish a par value if desired.
5. Executing Articles of Incorporation
The Articles of Incorporation is the official document that creates a Florida corporation. It can be filed online, in person, or by mail with the Florida Department of State for a filing fee. Florida’s standard form only provides for a corporation with one share class. A corporation with multiple share classes must draft its own document. A business lawyer may be helpful in this situation.
The Articles of Incorporation include:
- The corporate name and principal address
- The statement of purpose
- The number of authorized shares that the corporation is allowed to issue
- The corporate officers’ and directors’ names and addresses
- The corporate registered agent’s name and street address
- The name and address of the incorporator
- The signatures of the registered agent and the incorporator
For more information, see: FL Stat § 607.0202.
6. Holding an Organizational Meeting
The first meeting with the incorporators and potentially the initial corporate directors (appointed by the incorporators) is used to make key decisions. Attendees of the first organizational meeting will usually:
- Set up a corporate records book to maintain all important records
- Create and approve bylaws
- Select initial directors and officers
- Select a corporate bank
- Set the corporation’s fiscal year
- Execute an Incorporator’s Statement
- Adopt Articles of Incorporation
The organizational meeting should be memorialized in meeting minutes by an incorporator or director and stored with the corporate records. Florida mandates recording of meeting minutes.
For more information on Florida corporate law, see: Florida Business Corporation Act.
7. Executing an Incorporator’s Statement
The Incorporator’s Statement includes the complete name and address of each initial director. Initial directors serve until the board of directors is elected during the first shareholders meeting. The Incorporator’s Statement should be preserved with the rest of the corporate records.
8. Preparing Corporate Bylaws
Bylaws are simply a corporation’s rules dictating the actions of its members. Bylaws must be kept up-to-date and are amended by calling a special meeting. Bylaws may provide:
- How the corporation will be governed (the roles of the directors and officers)
- How meetings are held, how voting is done, and how officers and directors are elected
- How a “quorum” is defined for voting purposes
- The date of the annual shareholders meeting
- How notice of meetings will be given (notice is required in Florida)
- How records are kept and managed, including meeting minutes (required in Florida)
- How disputes are resolved
- How contracts are negotiated
- How bylaws are amended and kept up-to-date
- Fiduciary duties to the corporation (e.g., the duties of care and loyalty)
9. Issuing Stock
Stock may be issued to shareholders in exchange for a variety of valuables, including cash, property, services, or all three. A stock transfer ledger should record each shareholder’s name and contact information.
Shares of stock are considered securities. Federal law exempts private offerings (non-advertised sales of stock to a limited number of individuals) from federal securities law, so long as a corporation files Form D within 15 days of the first sale. If a corporation uses Rule 506(b) as its exemption, the stocks issued will be restricted securities.
Florida similarly exempts the private non-advertised sale of shares to 35 or fewer in-state purchasers. This limit does not include insiders, such as relatives or spouses of a purchaser who live with the purchaser, or trusts, estates, corporations, or other entities controlled by a purchaser or a relative or spouse living with them. Accredited investors and certain purchasers who invest $100,000 or more are also excluded.
Corporations interested in selling stock publicly or to a large number of investors should consult a business lawyer.
10. Filing an Annual Report
All Florida corporations must file an annual report online each year to maintain active status. Annual reports are due to the Florida Department of State between January 1 and May 1 each year. A new corporation must file its first annual report in the year following its formation.
An annual report includes:
- The corporation’s document number (assigned by the Division of Corporations)
- The corporation’s name and address
- The corporation’s federal Employer Identification Number
- The registered agent’s name, address, and signature
- Principals’ (officers, directors, etc.) names and addresses
- A valid email address
11. Complying with Florida Tax and Regulatory Requirements
A corporation must apply for an Employer Identification Number (EIN) or Federal Tax Identification Number (FTIN) to open its business bank account, pay federal and state taxes, and hire employees. A corporation may apply for an EIN from the IRS online or by mail.
While Florida does tax business income, it does not impose a franchise or privilege tax. Florida corporations that pay wages must register through the Florida Department of Revenue. Florida corporations that sell a taxable product may need to register for a seller’s permit to collect and report taxes.
If a Florida corporation elects to operate as an S corporation, it must submit Form 2553 Election by a Small Business Corporation to the IRS. Form 2553 must be filed within two months and 15 days of the beginning of the tax year when it is to be effective.
Incorporators should check for other necessary business licenses, such as health permits if opening a restaurant. Licenses may be necessary on the federal, state, and local levels.
