The Tax Cuts and Jobs Act, which was signed into law on December 22, 2017, has far-reaching implications for many Americans. However, one outcome that may affect all Floridians is the prospect of more neighbors. The new federal tax bill generally favors more competitive, low tax states such as Florida. In addition to added residents, Florida may see an increase in companies that call Florida home. For years, Florida has boasted a favorable tax climate for businesses. Some tax incentives that attract business owners include a broad range of sales and use tax exemptions available to business, as well as the absence of corporate taxes for limited partnerships and some other entity forms, to name a few benefits.
While these tax benefits are nothing new, the recent federal tax law further highlights Florida’s advantageous business climate. Consequently, some analysts anticipate business owners relocating to Florida. Some basic questions a business owner should review when considering a move to Florida include:
(1) What type of entity is the business, and what are the options for moving it to Florida? Depending on what type of entity it is (for example, a corporation vs. a limited liability company vs. sole proprietorship), there may be multiple options for operating the business in Florida. Some options for LLCs and corporations include registering in Florida as a “foreign” entity, while still operating in another state; merging a former entity with your newly created Florida entity; or, liquidating or dissolving the former business and forming a new business in Florida. On the other hand, a sole proprietorship may require registration of a Doing Business As (“DBA”). Each of these options have unique tax implications that should be carefully considered in the decision-making process.
(2) How many owners or shareholders does the business have, and what are the terms of the operating agreement or other controlling documents? For example, shareholders may be paying taxes on the liquidation of appreciated assets. Considerations such as this may affect the analysis and require discussions in advance, as well as require certain documents to be executed.
(3) What steps need to be taken to “close down” business in the former state? There may be applicable local tax, license, or permit issues that warrant attention. The business may also need assistance filing a Final Tax Return and a full review of the tax implications for liquidating, dissolving, or merging a business.
Out-of-state business owners seeking to benefit from Florida’s tax climate would be well-advised to research and determine which option is best suited to their needs.