Florida Corporate Income Tax Explained

Florida’s corporate income tax applies to corporations that conduct activities and earn income within the state. Let’s look at the tax structures to see if you’re company would be subject to Florida’s Corporate Income Tax.

C-Corporations:

If your business is structured as a traditional C-Corporation, you are generally subject to Florida’s corporate income tax.

S-Corporations:

In Florida, S-Corporations generally do not pay state corporate income tax on their profits. Instead, the income “passes through” to the individual shareholders, and they report their share of the S-Corporation’s income on their personal tax returns. Florida does not have a personal income tax, which means that individual shareholders do not owe state income tax on their share of the S-Corporation’s income.

An S Corporation can choose to be taxed as a C Corporation if it meets certain criteria and follows the necessary procedures. This process is known as “revoking S Corporation status” and typically involves notifying the Internal Revenue Service (IRS) of the intention to change the tax status.

Limited Liability Companies (LLCs):

In Florida, the tax treatment of an LLC for corporate income tax purposes depends on how the LLC is classified for federal tax purposes and its specific activities.

Here’s when an LLC would and wouldn’t be subject to the corporate income tax in Florida:

Single-Member LLC (Disregarded Entity) or Partnership for Federal Tax Purposes:

• Not Subject to Corporate Income Tax: If an LLC has a single owner (a “single-member LLC”) or multiple owners (a “multi-member LLC”) and is classified as a disregarded entity (for single-member LLCs) or a partnership (for multi-member LLCs) for federal tax purposes, it generally does not pay corporate income tax at the state level in Florida.

• Pass-Through Taxation: Instead, the income and losses “pass through” to the individual owners, who report their share of the LLC’s income on their personal tax returns. Florida does not have a personal income tax, so LLC owners do not owe state income tax on this income.

LLC Electing Corporate Taxation (C Corporation) for Federal Tax Purposes:

• Subject to Corporate Income Tax: If an LLC chooses to be treated as a C Corporation for federal tax purposes, it is subject to Florida’s corporate income tax on its taxable income at the state level.

• Corporate Tax Rates: The LLC will be taxed at the applicable corporate income tax rate in Florida, which as of my last update in 2022 was 5.5%. This tax is paid by the LLC itself, and any distributions to the LLC’s owners are generally not subject to additional state-level income tax.

LLC Electing S Corporation Taxation for Federal Tax Purposes:

• Not Subject to Corporate Income Tax: If an LLC chooses to be treated as an S Corporation for federal tax purposes, it typically does not pay corporate income tax at the state level in Florida.

• Pass-Through Taxation: Similar to the single-member or partnership LLCs, income and losses “pass through” to the individual owners, and they report this income on their personal tax returns. Florida does not impose a state income tax on this income.

Exceptions and Considerations:

• Certain types of income generated by an LLC, such as rental income or specific Florida-source income, may still be subject to state-level taxes regardless of the LLC’s federal tax classification.

• LLCs engaged in specific regulated activities or industries, like banking or insurance, may have additional tax obligations or regulatory requirements.

• Tax laws can change, so it’s essential to stay updated on any legislative developments or regulatory changes that could affect the tax treatment of your LLC.