An S-Corp is a tax designation that allows business owners to reduce self-employment taxes by splitting income between salary and distributions. For self-employed Floridians earning over $60,000 annually, forming an S-Corp can provide significant tax savings while maintaining the liability protection of a formal business structure. In this guide, we’ll walk you through the benefits and steps to start an S-Corp in Florida.
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What is an S-Corp?
An S-Corp is not a separate business entity type but rather a tax classification available to LLCs and corporations. By electing S-Corp status with the IRS, your business passes income, losses, deductions, and credits through to shareholders for federal tax purposes. This structure allows owners to pay themselves a reasonable salary subject to employment taxes while taking additional profits as distributions, which aren't subject to the 15.3% self-employment tax.
S-Corp definition
An S-Corporation is an IRS filing designation that allows an LLC to elect to be taxed as a corporation while still operating as a pass-through entity. With this election, you can pay yourself a salary, cover health insurance premiums for you and your family as an employee benefit, and set up retirement plans with contributions from both you as the employee and you as the owner, including deductible employer contributions. It also enables the business to purchase assets and take depreciation expenses, clearly separate personal and business finances, and apply for credit in the business’s name rather than your own.
The key distinction of an S-Corp lies in how the IRS treats your income. Instead of paying self-employment tax on all business profits as a sole proprietor or standard LLC would, S-Corp owners only pay employment taxes on their salary portion. The remaining profits distributed to owners avoid these additional taxes, creating substantial savings for many self-employed professionals.
Florida S-Corps Overview
Florida offers a particularly favorable environment for S-Corps due to the state's business-friendly tax structure. The state imposes no personal income tax, meaning S-Corp owners benefit from federal tax savings without additional state income tax complications.
Benefits of an S-Corp Election for Florida Self-Employed Professionals
The primary benefit of S-Corp status in Florida is self-employment tax savings. Self-employed individuals typically pay 15.3% in self-employment taxes on all net business income, but S-Corp owners only pay employment taxes on their salary. For a business owner earning $100,000 annually who takes a $60,000 salary and $40,000 in distributions, this structure saves approximately $6,120 in taxes annually.
Florida's lack of state income tax amplifies these benefits. While S-Corp owners in other states must navigate state-level tax implications, Florida residents enjoy their federal tax savings without additional state tax complexity.
5 Reasons Why an S-Corp Benefits Self-Employed Pros
This video breaks down five key reasons why S-Corp status can benefit self-employed professionals, including detailed explanations of how self-employment tax savings work and what to expect when electing S-Corp taxation.
Requirements for Starting an S-Corp in Florida
To form an S-Corp in Florida, you must first establish either an LLC or corporation with the Florida Division of Corporations. Your business must meet specific IRS requirements: no more than 100 shareholders, only one class of stock, and shareholders must be U.S. citizens or residents. The business cannot be a financial institution, insurance company, or domestic international sales corporation.
After establishing your LLC or corporation in Florida, you must file Form 2553 (Election by a Small Business Corporation) with the IRS. This form must be submitted no more than two months and 15 days after the beginning of the tax year when the election is to take effect. For new businesses, this means filing within 75 days of formation or the start of the tax year.
If you missed the deadline, you may still be able to elect S-Corp status through a late S-election. The IRS often grants relief when businesses can show reasonable cause for missing the original filing window, allowing the S-Corp election to apply retroactively to the intended tax year. This is especially common for new business owners who were unaware of the timing requirements or received incorrect guidance early on.
S-Corp Set Up and Maintenance Costs
The cost to establish an S-Corp in Florida begins with forming your underlying business entity. Filing Articles of Organization for an LLC costs $125 with the Florida Division of Corporations. If you choose to form a corporation instead, filing Articles of Incorporation costs $70, though corporations typically require more complex ongoing maintenance.
Beyond initial formation costs, you'll need to file Form 2553 with the IRS (no filing fee). Many business owners work with attorneys or formation services to ensure proper compliance, which can cost between $500 and $2,000 depending on the complexity of your situation and level of service required.
Annual renewal fees for Florida LLCs and corporations are $138.75 and $150 respectively, due by May 1st each year.
S-Corp Compliance Deadlines
S-Corp compliance requires careful attention to multiple deadlines throughout the year. You must file Form 1120-S (U.S. Income Tax Return for an S-Corporation) by March 15th each year, or the 15th day of the third month following the end of your fiscal year. Extensions are available by filing Form 7004, which extends the deadline to September 15th.
Payroll tax obligations occur more frequently. If you operate on a quarterly payroll schedule, you must file Form 941 by the last day of the month following each quarter. Many S-Corps process payroll monthly or semi-monthly, requiring more frequent deposits of withheld taxes.
Florida's annual report deadline falls on May 1st each year for both LLCs and corporations. Missing this deadline results in late fees and potential administrative dissolution of your business entity.
Steps for filing as an S-Corp in Florida
Becoming an S-Corp in Florida follows a specific sequence of steps that build upon establishing your business entity.
1. Form your LLC or corporation
Form your LLC or corporation with the Florida Division of Corporations by filing the appropriate formation documents and paying the required fees. Choose a unique business name that complies with Florida naming requirements and appoint a registered agent with a Florida street address to receive legal documents on behalf of your business.
2. Obtain an Employer Identification Number (EIN)
Obtain an Employer Identification Number (EIN) from the IRS. You can apply online at IRS.gov, and you'll receive your EIN immediately upon completion. This number is essential for tax filings, opening business bank accounts, and hiring employees.
3. File Form 2553 with the IRS
File Form 2553 with the IRS to elect S-Corp tax treatment. Complete all required sections, including shareholder consent statements, and submit the form within the specified timeframe. The IRS will send a confirmation letter once your election is approved, typically within 60 days.
4. Determine a Reasonable Salary
Establish reasonable compensation for yourself as an owner-employee. The IRS requires S-Corp owners who work in the business to pay themselves a reasonable salary for the services they provide. This salary should reflect what you would pay someone else to perform your job duties and must be paid through regular payroll with appropriate tax withholdings.
5. Set up Payroll Processing
Set up payroll processing to handle salary payments, tax withholdings, and quarterly payroll tax filings. You can use payroll software, work with a bookkeeper, or hire a payroll service to ensure compliance with federal and state requirements.
6. Maintain Proper Corporate Formalities
Maintain proper corporate formalities, including separate business bank accounts, accurate financial records, regular shareholder meetings (documented in minutes), and clear separation between personal and business finances.
S-Corp vs. LLC Considerations in Florida
The comparison between S-Corps and LLCs in Florida centers on tax treatment rather than legal structure. An LLC (Limited Liability Company) is a business entity type that provides liability protection and flexible management options. By default, single-member LLCs are taxed as sole proprietorships, while multi-member LLCs are taxed as partnerships.
An S-Corp is a tax election, not an entity type. You can elect S-Corp status for your LLC, combining the flexibility of LLC management with the tax advantages of S-Corp treatment. This means the S-Corp vs. LLC question is really about whether to maintain default LLC taxation or elect S-Corp taxation for your LLC.
How to Decide Between an S-Corp vs. LLC in Florida
Deciding when to move from an LLC to an S-Corporation depends primarily on your income level and business circumstances. The general threshold for considering S-Corp election is $60,000 in annual net business income. Below this level, the administrative costs and complexity typically outweigh the tax savings.
Consider your tolerance for additional compliance requirements. S-Corps demand regular payroll processing, additional tax forms, and careful record-keeping. An LLC offers simplicity and minimal overhead, but with a trusted professional guiding the process, electing S-Corp status can unlock significant tax savings and benefits that often outweigh the added complexity and cost.
How to Convert an LLC to an S-Corp in Florida
Converting your LLC to an S-Corp in Florida is straightforward since you're not changing your business entity, only your tax classification. You don't need to file any documents with the State of Florida or create a new business entity.
The conversion process requires only one step with the IRS: filing Form 2553. Complete the form with your LLC's information, ensure all members sign the shareholder consent section, and submit it to the IRS. Generally, the election must be filed within 75 days of your LLC’s formation or within 75 days of the beginning of the tax year for which the election is intended to apply. If you miss this window, you may still qualify for a late S-Corp election or file during the year to have the election take effect for the following tax year.
After receiving IRS approval, establish payroll and begin paying yourself a reasonable salary. Update your bookkeeping systems to distinguish between salary payments and distributions. Notify your accountant or tax preparer about the change so they can prepare the appropriate tax forms going forward.
How Much You Can Save with an S-Corp in Florida
Tax savings from S-Corp election vary based on your income level and salary-to-distribution ratio. A self-employed professional earning $100,000 annually who establishes a $60,000 salary saves approximately $6,120 in self-employment taxes. Someone earning $150,000 with a $90,000 salary saves roughly $9,180 annually.
These calculations assume the 15.3% self-employment tax rate applies only to the distribution portion of income. For example, with $100,000 in profit, a $60,000 salary, and $40,000 in distributions: $40,000 × 0.153 = $6,120 in savings. Keep in mind this is a simplified calculation that doesn't account for additional deductions or benefits that affect your tax savings.
Formations S-Corp Tax Savings Calculator
Florida S-Corp Frequently Asked Questions
How much does it cost to form an S-Corp in Florida?
Starting an S-Corp in Florida costs $125 for LLC formation (or $70 for corporation formation) plus no federal filing fee for Form 2553. Additional costs include registered agent services ($100-$300 annually), legal or formation assistance ($500-$2,000), and annual renewal fees of $138.75 for LLCs or $150 for corporations. Total first-year costs typically range from $800 to $3,000 depending on whether you use professional services.
How do I start an S-Corp in Florida?
To start an S-Corp in Florida, form an LLC or corporation with the Florida Division of Corporations, obtain an EIN from the IRS, and file Form 2553 to elect S-Corp taxation. The form must be filed within 75 days of formation or the beginning of your tax year. After IRS approval, establish payroll to pay yourself a reasonable salary and maintain proper corporate records and compliance.
Is it better to have an LLC or S-Corp in Florida?
An LLC with S-Corp election combines the best of both structures for many Florida business owners earning over $60,000 annually. This setup provides LLC flexibility and management simplicity while delivering S-Corp tax savings. The decision depends on your income level, tolerance for compliance requirements, and long-term business goals.
Ready to Start Your S-Corp?
Forming an S-Corp in Florida provides substantial tax benefits for self-employed individuals earning sufficient income to justify the additional compliance requirements. The combination of federal self-employment tax savings and Florida's lack of state income tax creates an attractive environment for S-Corp owners.
The process requires careful attention to formation steps, filing deadlines, and ongoing compliance obligations. Proper planning and execution ensure you maximize tax benefits while maintaining good standing with both the IRS and Florida Division of Corporations. Formations specializes in helping self-employed individuals navigate S-Corp formation, tax elections, and ongoing compliance requirements. Our team of experts has helped thousands of self-employed pros save $14,801 on average.
Get Started with Formations
Schedule a call with our expert team to receive expert guidance through the S-Corp formation process. Our team specializes in helping self-employed professionals navigate Florida's requirements, establish compliant payroll systems, and optimize their tax strategies for maximum savings.
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