Could moving your business to Florida reduce your business expenses? Given the rising costs of operating a business in the U.S., it’s a valid consideration. To answer, we’ll focus on corporate income tax in Florida and whether businesses have to pay it. If you are considering starting a business in the Sunshine State or moving shop for more favorable tax laws, read on. We’ve got some eye-openers for you!
What is Corporate Income Tax?
Before we get into details of corporate income tax in Florida, let’s unpack the term ‘corporate income tax’ for a bit. Corporate income tax is the tax a corporation pays on its profit (taxable). In the United States, businesses often pay corporate income tax at the federal and state levels. The current federal corporate tax rate is 21%.
What is Taxable Income?
Taxable income is the portion of a business’s income that is subject to taxation by the federal or state government. Corporations calculate their taxable income by subtracting expenses (like salaries, rent, and cost of goods sold) from their revenue. States also impose their corporate taxes, which vary significantly. Interestingly, some states, like Wyoming and North Dakota, do not have corporate income taxes. Are you wondering if Florida is one of them? Let’s find out!
Do Businesses in Florida Pay Corporate Income Tax?
YES. Florida imposes corporate income taxes. If you set up shop in Florida, the state will charge a 5.5% corporate income tax rate. That’s a bummer, isn’t it? Well, no. There’s more.
While Florida imposes a corporate income tax, not all businesses have to pay. Only traditional corporations (C corporations) are subject to state-level corporate income tax in Florida. Most new small businesses start as S corporations, limited liability companies (LLCs), partnerships, or sole proprietorships, which do not have to pay corporate income taxes in Florida. So, Florida can be a tax-friendly state for you, depending on your business entity.
Florida’s 5.5% corporate income tax rate is competitive compared to many other states, which often have higher corporate tax rates or additional surtaxes. Unlike some states, Florida has no personal income tax, making it attractive for business owners looking to minimize overall tax burdens.
State vs. Federal Corporate Income Tax in Florida
If your business is subject to corporate income tax in Florida, you must pay both the state and federal rates. You cannot pay one and leave out the other. That would be an infraction that can result in serious legal consequences for your business. So, when it comes to corporate income tax in Florida, here’s a breakdown of what you must pay:
- State corporate income tax: 5.5% of your taxable income
- Federal income tax: 21% of your taxable income
Parting Tip
When in doubt about whether or not the state of Florida requires your business to corporate income taxes, consult a tax expert. Take no chances that can risk the financial health of your business. More importantly, besides not paying corporate income tax, there are other legal ways to reduce your tax burden. In fact, helping business owners like you to legally pay the lowest tax amount is what we do at Tax Goddess. So, if you are ready to start keeping more business profit by paying lower taxes, give us a call.
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