A corporation is a legal entity formed in accordance with state law and separate from its owners. It is owned by shareholders that have purchased shares of the corporation’s stock. The shareholders elect a board of directors, who in turn oversee the entity’s operations and officers.
Incorporation offers several distinct advantages, including the option to elect S-Corp taxation, but are more complicated to operate than a Florida LLC:
- Secure Assets: Corporations offer limited liability protection, which secures the owner assets from any business debts. Additionally, corporations often times gain tax advantages on things like insurance premiums and other tax write-offs.
- Reinvestment Possibilities: Corporations have the ability to reinvest profits back into their companies, which fuels growth and research, or pay off company debts. Also, corporations have the unique means of raising capital through selling stock, which is attractive to investors and banks.
- Greater Credibility and Prestige: Corporations provide a trusted administrative structure with a long history of success. For this reason, incorporating instantly gives businesses a leg-up on competition by promoting a business structure associated with longevity and stability.
How to Incorporate in Florida:
Articles of Incorporation
Filing Articles of Incorporation for your business is the first step. This document lists some of your corporation’s basic information. This will include the name of your corporation, which must be unique from other Florida corporations. Additionally, these articles require you list the information of your corporation’s registered agent.
Florida has a $35 filing fee for Articles of Incorporation. You can complete the filing online at the Department of Corporations site, by mail, fax, or hand delivery. If you choose to mail your articles, the usual processing time is one week. However, submitting your articles online will take no longer than two days.
Designating a registered agent for your corporation is the second step. Make sure the person or company you designate to serve as your registered agent is able to complete the necessary role requirements. Some of these main roles are:
- Receiving official documents on behalf of the company.
- Maintaining regular business hours at their designated address.
- Informing the business of any important notifications or legal notices.
Also, when filling out your Articles of Incorporation, you must list the registered agent’s information, such as their name and physical address. With this in mind, make sure the registered agent is comfortable with this information being public. If not, you may look to enlisting the services of an attorney or formation service to serve in this capacity.
There is an additional $35 fee associated with designating your registered agent. Together with the articles of incorporation fee, your total filing fee will be $70.
Writing your corporation’s bylaws is the third step. Your bylaws serve as the rules of your corporation. You can use your bylaws as an important organizational tool, outlining the duties of different roles within the company and how certain operations are to function.
While corporate bylaws are not actually essential to complete the incorporation process, they do exhibit good practice by your company, as well as smart leadership. Your corporate bylaws will outline how to run the company and the responsibilities of its ownership. Deciding to forgo this process will leave your company vulnerable to organizational and administrative problems.
Authorizing shares of stock to determine company ownership is the fourth step. This is accomplished in your Articles of Incorporation. There are two classes of stock that you can choose to authorize: Preferred Stock and Common Stock. Typically, corporations only have one class of common stock, which offers basic ownership and voting rights. In some cases, a corporation also offers preferred stock, which carries special guarantees, voting rights, or dividends.
Additionally, your articles must set a par value for the corporation’s stock. Par value is the minimum stated price that the share can sell for. For example, if your common stock par value is set at $5, then the shares cannot sell for any amount less than $5.
Florida S Corporation
By default every Corporation is taxed as a "C-Corp" with the IRS. This means the corporation will file its own tax returns and pay the federal rate for corporate income tax. If profits are distributed, then shareholders incur double taxation. An S-Corp election is a type of pass-through taxation. This means income flows to the owner's income statements regardless of whether the profits are distributed. This avoidance of double taxation is what appeals to many, but each shareholder must be a US-resident and there cannot be more than 75 shareholders. Learn more here about Florida S Corporations.
Dissolving a Florida Corporation
Not every business works out and some must be dissolved. You can dissolve a Florida Corporation in one of two ways. The first is the simplest because you simply fail to pay the annual report and you will be administratively dissolved. There are more details on annual reports in the section below. The second option for dissolution is to pay Sunbiz $35 and submit the correct form.
Corporate Annual Renewals
Filing your corporation’s annual reports is the fifth step. In order to maintain your corporation’s good standing in the State of Florida, you must file annual reports. The fee to do so is $150 for corporations. You must file your annual report between January 1st and May 1st. It is important that you file these reports routinely and on time. Failure to file on time results in a penalty of $400. Continuing to not file your annual report results in an administrative dissolution of your corporation by the Florida Division of Corporations. It is possible to reinstate your corporation if it has been dissolved, but this can happen only after you have paid all past fines and new processing fees.