Starting a business in Florida can be a difficult process even for those with business experience or higher education. Legal and state requirements can seem overwhelming, and many potential business owners may feel discouraged before they even begin the process.
This article will highlight Florida’s legal and state requirements as well as provide some tips to help you start your own business in the sunshine state.
Starting a Florida Business
To start a business in Florida, there are specific steps that business owners must follow. These steps include the following:
- Conduct market research and develop a business plan.
- Decide on a business structure.
- Choose a location for your new business.
- Register with the Florida Department of Revenue.
- Apply for a federal tax ID number or EIN for your business.
- Get licenses, permits, and zoning clearance from the city or county.
- Open a business bank account and deposit the required funds with your newly established company name.
- Obtain insurance policies for your business, including property and liability coverage.
- Establish an accounting and tax filing system.
- Create a marketing plan and execute the strategies to get the word out about your business.
- Obtain funding for your business.
- Recruit and hire employees, if needed.
- Open for business and start generating revenue.
Each of these steps is explained in more detail below.
Conducting Market Research and Developing a Business Plan
Before you begin the process of starting a business in Florida, it is important to conduct market research and develop a business plan. Doing so will help you set the foundation for your company and determine whether or not there is enough interest in your product or service to sustain your business. This includes understanding the rules and regulations for the state in which you will operate.
Conducting thorough market research is generally the first step you should take when starting a business, and that research should include the following:
- Researching and evaluating your industry.
- Evaluating customer demand.
- Determining pricing and product margins.
- Evaluating competition and their strategies to stay ahead of them.
In addition to conducting market research, you must develop a business plan. A business plan will help you determine the steps necessary to start your own company and keep your financial goals in mind from the beginning. It can also be used as a reference during difficult financial times in which you might be tempted to reduce expenditures. Our collection of business plan examples can help you determine the best type of business to start.
Deciding on a Business Structure
To start a Florida business, you must choose a business structure. The four main types of business structures are sole proprietorship, partnership, and corporation. Choosing the right formal business structure is important because it will affect your tax obligations, the liability of losses, and your ability to expand.
- Sole Proprietorship: This type of business is owned by one person only who has complete control over the operation. Often this individual is also responsible for all major decisions concerning the company as well. The owner of a sole proprietorship business is held liable for all the debts incurred by the company in most cases. All profits are reported on your tax return, which means you must pay the taxes at the rate set out for self-employment taxes.
- Partnership: This type of business is owned by two or more people who have equally important roles in the company. Each business owner has full control over running the business, but all owners are equally liable for any debts incurred. All profits are also distributed in equal percentages to each partner in the company. As with sole proprietorship businesses, partnership businesses must report their revenue on individual tax returns and pay self-employment taxes when they file their taxes at the end of the year.
- Limited Liability Corporation (LLC): This type of business is owned by one or more people, but their liability is limited to the money they have invested in the company. All profits are distributed equally among all owners at the end of each year, and taxes on those earnings are reported as income on individual tax returns. Owners of a limited liability company are not responsible for any debts that exceed the value of the money they have invested in the company.
- Corporation: This is a type of business that is owned by shareholders who have limited liability for company debts because they are not responsible for incurring said debts personally. Corporations are considered separate entities from their owners, which means that any debt obligations incurred by the corporation do not fall on the individual’s tax return. A Florida corporation is often much more expensive to start, but it can also provide greater tax advantages.
Filing a DBA for Your Business
After you have decided on the best type of business structure for your company, the next step in starting your business is to file a DBA (Doing Business As) statement with your local county clerk’s office.
This statement will allow you to register your company under a fictitious name other than your legal Florida business name, which means that when people refer to the business they will use its DBA rather than its real name. The process of filing a DBA in Florida requires submitting the business’ fictitious name information, the types of businesses it will be engaged in, and the principal business address. Once processed, this information will be included in your Official Records, which are made available to anyone who requests them.
Choosing a Business Location
When choosing a location, it is important to keep in mind Florida’s strict zoning laws concerning commercial real estate.
The City of Miami, for example, requires that new businesses obtain special approval through an application process before establishing their locations there. They also require that businesses meet certain zoning conditions before approval can be granted.
Other considerations for choosing a business location include:
- Whether the location is near your target market.
- Whether it is accessible to employees, suppliers, and customers.
- The available space at the location you are considering renting or purchasing.
Registering with the State of Florida
The next step in beginning a business in Florida is to register with the state through the Division of Corporations. This process involves submitting your fictitious name information, proof of good standing from the Secretary of State if you are a foreign corporation, and payment for the filing fee.
After registering with the state as a domestic or foreign corporation, you must then register your business with the Florida Department of Revenue, which will require filing an Employer Identification Number (EIN) application. You can also apply for a sales tax account at this time so you are ready to file taxes when they are due in April.
It is important to note that registering your corporation does not exempt you from paying all forms of taxes, such as income tax and employment tax.
Types of Taxes for Florida-Based Businesses
- Income Tax: Found in the state section of your federal return, this is a percentage of your gross business revenue that is payable to the government after you have claimed all allowable business expenses. In Florida, businesses with an annual income worth more than $300,000 must file an annual return and remit a flat 4.5% of their business income to the state government.
- Employment Tax: These taxes include such obligations as to pay for unemployment insurance and worker’s compensation (in Florida this is called Workers’ Compensation Insurance). Employers who have more than one employee working in the state must collect unemployment insurance premiums for the state government.
- Employee Withholding: These are amounts that must be withheld from employees’ paychecks and submitted to federal and state governments on their behalf so they can follow up on them later. The rates for this withholding are determined by the amount of money you pay an individual in any given year.
You can find additional tax information, including how to register here.
Applying for a Federal EIN
A federal Employer Identification Number (EIN) is an identification number that the Internal Revenue Service (IRS) issues to businesses to identify them for tax purposes. The EIN can be used by any business, even if it does not have employees. It should only be applied for after you have decided on a business name.
Apply for a federal EIN here.
Getting Licenses, Permits & Zoning Clearance
Depending on what kind of business you are starting, there may be special business licenses and permits that you must obtain before beginning to operate. Some businesses like lawyers, real estate agents, accountants, and travel agencies for example also need to get a state license or registration through the Florida Department of Business & Professional Regulation (DBPR).
Before opening a business in Florida, you must be sure that there are no local zoning restrictions in your area. This is important to know because different types of businesses require different certifications or permissions. For example, if you want to start a business that manufactures chemicals you will need to apply for a special permit that allows this activity under the Resource Management Act (RMA).
Business owners who would like to create a product or carry out a service as part of their business activities should make sure they are not infringing on anyone’s intellectual property rights. If your company is found guilty of distributing an item that infringes another person’s IP rights, you could be liable for damages and prosecuted under criminal law.
Opening a Business Bank Account
Like any other company, a Florida business must have a business bank account to conduct its financial operations. All revenues and expenses must be recorded in the books of the business as well as those from any side businesses that are being run by the principals of your venture.
For your business to have separate banking records from those of the owner, you should open an account under the company’s name. Depending on the bank, you may be able to provide only the EIN for this application instead of having to provide all of your personal information as well.
Before opening a checking or savings account, find out whether there are any fees associated with operating it and/or maintaining certain minimum balances. If your business is a start-up or does not have many transactions, it may be wise to open an account with no fees attached.
Getting Business Insurance
One of the most important aspects of starting any company is making sure that all employees are well protected in case of an accident at work that leads to injury or death. This is why business owners must purchase business insurance.
The kind of coverage you need to get and the extent of that coverage will vary depending on what your business does and how many employees you have. You can purchase this type of insurance from an agent or broker, an independent agency, or directly from certain insurance firms.
Business Insurance Coverage Options:
- General Liability Insurance is required by law in most states and covers the expenses that may arise due to bodily injury or property damage that occurs at your business. Property Insurance
- Property Insurance protects tangible property like buildings, computers, equipment, inventory, furniture, etc. The coverage also includes loss of use (additional living expenses) if your building becomes partially unusable. For Store-based businesses, inventory can be insured separately under a business owner’s policy (BOP).
- Employment Practices Liability Insurance protects your company against lawsuits filed by current or former employees for wrongful termination, sexual harassment, discrimination, etc. It also covers the cost of outside counsel to defend you in court during cases like these.
- Workers’ Compensation Insurance was established to help pay for medical expenses, rehabilitation, and lost wages for employees who get injured on the job. This type of insurance is required by law in every state including Florida.
- Employer’s Liability Insurance is a form of coverage that protects your company against claims made by customers for bodily injury, property damage, or personal injury/advertising injury they suffer during their business dealings with you. It also covers expenses resulting from libel and slander lawsuits.
- Property/Business Owners’ Insurance is similar to the above but it offers more extensive coverage options including protection against temporary loss of use and liability insurance. It also includes general liability, crime, earthquake, flood, and business interruption coverage.
- Commercial Umbrella Insurance is an add-on option to your existing policy that covers claims above the primary coverage limits.
Establishing an Accounting and Tax Filing System
Establishing an accounting and tax system is critical to your business’s success. You will need to keep track of all the company’s revenue and expenses, set up a payroll system for employees, determine how much income tax you owe, apply for any necessary business licenses or permits, collect sales tax on products sold, etc.
There are many accounting software options designed to suit different types of businesses. You should consider shopping around for the one that is right for your business, consulting with an accountant about what you need before making a purchase, and trying out some free demos on it if possible. Your accountant can also show you how to use these programs or recommend other software for helping with your company’s accounting needs.
For the time being, you may want to consider using a spreadsheet program to track business income/expenses until you are ready to purchase an accounting software program. Most spreadsheets have built-in formulas that will help you easily track revenue and expenses without much effort on your part.
If you have employees in your business, you will need to establish a payroll system. You can do this yourself or hire an accountant to help you with it. You will need to withhold taxes for your employees (Federal Income tax, Social Security, etc.) and also make contributions on their behalf for benefits like healthcare.
Creating a Marketing Plan
A marketing plan provides a road map for promoting your product/service and ensuring the success of your business. The marketing plan specifies how you will reach your target audience, what marketing tools you will use to promote your product or service, and which strategies you will employ to get people to buy it.
Your marketing plan should also include your business’s unique selling proposition (USP)—what makes your product/service different from others of its kind and how it will benefit consumers. You need to find out what people in your target market want and then figure out a way to provide it for them in order to meet their needs and exceed their expectations.
Once you have established a plan, you should create a budget and determine where your company will get the funding to support it.
You also need to consider the costs and benefits of building and maintaining your brand name or using a different business name for marketing purposes. You will need to research how much it costs to register a domain name, trademark, etc., and weigh it against other options for promoting your company.
How to Market Your Business
No matter what type of business you have, marketing is essential for its success. Marketing can be broken down into two main categories—business-to-consumer (B2C) and business-to-business (B2B). You will need to decide which one works best for the type of customers you are targeting.
Consider the different marketing tools available to you including TV, radio, social media networks, billboards, bus stops, newspapers, and magazines. You will also need to decide which form of advertising works best for your business based on where your target customers spend time (TV for younger audiences; newspaper ads for older people).
You may want to consider setting up a business website and/or blog. This can help you reach new customers, facilitate communication between you and your existing customers, and provide information about your products or services that will help establish your company as an authority figure in its field.
Obtaining Funding For Your Business
When you first start your business, the most common way to obtain funding is through bootstrapping. Bootstrapping is when you use your own resources to fund your company. This can include drawing money out of your savings account, borrowing against the equity in your home or other property, or even selling personal items.
You may also want to consider getting a small business loan from your local bank or the Small Business Administration (SBA). However, you will probably need to provide collateral and meet specific requirements to get approved. You also risk losing the money you borrow if your company fails and can’t repay its debts.
Another common way for new businesses to obtain funding is through friends and family members—as long as they have the money you need and believe in your business idea.
Another option for obtaining funding is crowdfunding, which uses the internet to raise money from a large number of people for purposes that can include starting a new company or growing one that already exists. People who contribute funds are generally motivated by the opportunity to get involved with your business, receive rewards you offer (such as a product at a special price), and/or the chance to help you get off the ground and make their money back.
Recruiting and Hiring Employees
Once you have established your company, you will need to hire employees. You can recruit people locally or look for candidates on websites that specialize in helping employers find the best person for the job. Research ways to find quality employees through networking, advertising, and word of mouth among current or former colleagues.
You also have to decide whether you want full-time or part-time employees and whether you plan to hire on a temporary/seasonal basis (such as for special events).
You will be responsible for providing benefits packages including health insurance, 401(k) plans, and other perks. The costs of these programs vary depending on the size of your company and the number of full-time employees you have.
You will also need to take into account taxes that apply to all employees as well as any you have to pay for yourself, such as a personal income tax if you are a sole proprietor or an employer’s share of payroll taxes.
You may want to consider hiring independent contractors instead of full-time employees. They usually won’t receive benefits and will have to pay their own taxes. However, this can free you from several legal and administrative responsibilities associated with being an employer, such as providing written notice before terminating someone’s employment.
Opening For Business
The final step to getting your business up and running is opening for business. You’ll have to acquire necessary permits, meet zoning requirements, notify customers of your business’ launch date, and hire employees who are ready to start working.
Opening a retail location often requires several additional expenses, such as the cost of inventory, leases on commercial property and/or warehouse space, signs to display in front of your location, and utilities (although some may be covered in your lease).
You may need to hire professionals such as accountants, attorneys, and insurance brokers. You also have to find ways to promote your business—purchasing advertising in the print media or on billboards, getting a listing in the Yellow Pages phone book(s), using social media platforms such as Facebook and Twitter, or sponsoring word-of-mouth campaigns.
For more information on starting a business in Florida, visit the Florida Division of Corporations.