How Your LLC Will Be Taxed
In this guide, you'll learn about the primary Florida business taxes you'll be required to pay, including self-employment, sales, payroll, and federal taxes. The profits from an LLC aren't taxed at the business level the way they are in C Corporations. Instead, they're as follows:
State Taxes for LLCs
You're only required to pay sales tax to the Florida Department of Revenue. Depending on how your business is set up, you may also need to pay use tax or corporate income tax.
Florida Income Tax
Florida is one of nine states that do not have income taxes.
Florida Sales Tax
If you sell physical products (such as electronics, books, cars, furniture, appliances, raw materials, etc.) or certain types of services, you may need to collect Florida sales tax at the point of purchase. It's sometimes referred to as Florida sales and use tax. You'll remit the taxes you collect to the Florida Department of Revenue
The general Florida sales tax rate is 6 percent, with some exceptions. City, county and local jurisdictions may impose additional sales tax over and above that 6 percent base.
In Florida, some items such as bottled water, prescription drugs, vitamins, some grocery items and even some pet food items are exempt from sales tax. The Florida Legislature publishes a tax handbook with extensive lists of items exempt from FL sales tax.
Use our sales tax calculator to get an idea of what you'll need to pay, but always check with your accountant and the FL Department of Revenue to find out whether your business is required to collect sales tax and ensure you remain in compliance.
Florida Use Tax
If you buy taxable merchandise or services and don't pay sales tax at the time of purchase, you may owe use tax. It's sometimes referred to as Florida sales and use tax. Usually, you're required to pay Florida use tax if:
- you buy a taxable item in Florida and do not pay sales tax;
- you buy an item tax exempt intending to resell it, and then use the item in your business or for personal use; or
- you buy a taxable item outside Florida and bring it into (or have it delivered into) Florida, and you do not pay sales tax on the item.
Florida Corporate Income Tax
Some states — including Florida — levy a tax on certain businesses for the right to exist as a legal entity and do business in the state. This is usually called a franchise tax, transaction tax or privilege tax. In this state, it's the Florida Corporate Income Tax.
While it's mandatory for Florida Corporations, it can also sometimes apply to LLCs, specifically those that are classified as corporations for tax purposes.
Speak to your accountant or professional tax preparer to find out whether you're required to pay the Florida Corporate Income Tax to ensure compliance and avoid penalties.
Federal Taxes for LLCs
As the owner of an LLC, you must pay self-employment tax and federal income tax, both of which fall under “pass-through taxation."
Federal taxes can be complicated, so speak to your accountant or professional tax preparer to ensure that your Florida LLC is paying the correct amount.
Federal Self-Employment Tax
All members or managers who take profits out of the LLC must pay self-employment tax. This tax is administered by the Federal Insurance Contributions Act (FICA) and covers Social Security, Medicare and other benefits. The current self-employment tax rate is 15.3 percent.
You’ll be able to deduct some of your business expenses from your income when calculating how much self-employment tax you owe.
Pay Less Self-Employment Tax by Treating Your LLC as an S Corporation
The Internal Revenue Service allows an LLC to be treated as an S Corporation for tax purposes, provided your business meets certain requirements. By making this election, you can reduce the amount of self-employment tax you pay by declaring some of your income as salary and other income as distributions or withdrawals.
Talk to your accountant or tax preparer for more information on reducing your LLC self-employment tax through an S Corporation tax election.
You can do this by making an “S Corporation Tax Election” with the IRS using a form known as Form 2553. We can file your Form 2553 with the IRS on your behalf.
Federal Income Tax
You're also required to pay federal income tax on the earnings you receive from your LLC. The amount you pay will depend on your earnings, deductions, income tax bracket and filing status.
You only pay federal income tax on profits you receive from the business, minus certain deductions and allowances. This includes your tax-free amount, plus business expenses and other deductions for things such as healthcare and some retirement plans.
Speak to your accountant for more information.
Employee and Employer Taxes
If you pay employees, there are some slightly different tax implications. Speak to your accountant to get clear guidance for your unique situation.
Employees May Need to File Tax Returns
Regardless of whether you withhold federal employment tax, your employees may need to file their own tax returns.
Employee Insurance and Other Requirements
You may also need to pay insurance for any employees, such as employee compensation insurance or unemployment tax.
Other Taxes and Duties
Depending on your industry, your LLC may be liable for certain other taxes and duties. For example, if you sell gasoline, you may need to pay a tax on the fuel you sell. Likewise, if you import or export goods, you may need to pay certain duties.
Speak to your accountant about any other taxes or duties you may need to withhold or pay.
Most LLCs will need to pay estimated taxes throughout the year, depending on the amount of income and profit you expect to make. The most common types of estimated tax are: