Miscellaneous Tax and Business Matters
Taxpayer Identification Number
Each business must obtain a separate taxpayer identification number via filing Form SS-4.
Employment Taxes and Withholding
Employees are generally required to pay FICA and Medicare taxes with respect to wages. Such taxes are paid via withholding by the employer from the employee’s paycheck. The FICA tax rate is 6.2% and the Medicare tax rate is 1.45%. The maximum wage for FICA tax purposes is $176,100 for 2025. There is no maximum wage for Medicare tax purposes. The employer must pay a matching tax liability.
In addition, the employer must generally withhold income taxes from the employee’s paycheck. The employment tax and income tax withholdings and the employer’s employment tax liabilities are paid by the employer. Most employers must file a Form 941 within a month after each calendar quarter to report such withholdings and tax liabilities.
Unemployment Taxes
The federal government imposes an excise tax on each employer at the rate of 6.2% of the first $7,000 of wages paid to each employee each year, but provides a credit of up to 5.4% for state excise taxes paid to an unemployment fund. Thus the minimum federal tax is 0.8%.
The state gives each employer an experience rating based on unemployment benefits paid. If the experience rating is lower than 5.4% (i.e., low claims history), then the credit against the federal excise tax is 5.4%. Wages in excess of $7,000 are also not subject to the state unemployment tax. The state’s tax rate for new employers with no experience rating is 2.7%. Thus new employers will be liable for combined per employee per year unemployment taxes of $245 ($7,000 × (2.7% + 0.8%)).
For FUTA purposes, corporate officers are employees, but partners and LLC members are not employees if the partnership or LLC is taxed as a partnership. LLC members of LLC’s taxed as corporations are employees.
- New employers must file a Form UCS-1 to get an unemployment tax identification number.
- FUTA taxes must be deposited quarterly beginning in the first quarter that the employer’s liability for the year exceeds $100.
- State unemployment taxes are also paid quarterly via Form UCT-6.
- An annual Form 940 or 940-EZ must be filed on or before January 31 each year.
If an entity takes over the business and employees of another entity (e.g., via an asset sale), the successor succeeds to the predecessor’s experience rating, gets a credit for the predecessor’s FUTA taxes paid and can be held liable for the predecessor’s FUTA liabilities.
Sales and Use Taxes
A person who conducts a business involving admissions or the sale of goods is a dealer who must collect sales taxes on its sales of taxable goods and services and pay same to the State of Florida. Similarly, landlords of commercial (and short-term residential lease) property are considered dealers and must collect sales taxes on rents collected. Each dealer must register with the state via filing a Form DR-1. Sales taxes are paid monthly via Form DR-15CS. The state tax rate is 6%. Counties may impose additional sales taxes up to 1%, in which event the collection and payment process is the same, except for the tax rate.
The use tax is imposed whenever a person brings tangible property into the state without having paid a Florida sales tax on the purchase. A credit is available to the extent of sales taxes paid in another state. The use tax is rarely paid by consumers, but generates significant revenues in audits of Florida businesses which purchase equipment and supplies from out-of-state vendors.
When a business is sold, Fla. Stat. §212.10 provides that the buyer of inventory can be held liable for any sales taxes, interest and penalties which the seller does not pay unless the seller gets a release from the Department of Revenue (which generally requires an audit). This rule can act as a severe trap for the unwary. The buyer does not even get to participate in an audit of the seller conducted after the sale. I have had two cases where buyers of convenience stores ended up with sales tax liabilities of the sellers in excess of the purchase price.
Worker’s Compensation
"Worker’s compensation" is a general term for the system of laws that provide compensation to workers from their employers for job-related injuries. Under worker’s compensation laws, there generally is no question arising regarding the employer’s fault or the fault of any third person or assumption of risk by the employee, provided that the injury occurred in the course of employment. The basic idea is to provide an expeditious remedy for the injured employee and a liability for the employer which is limited and determinative.
The employer has a duty to "secure compensation" for its employees. This generally is achieved by purchasing insurance. The rates are a function of the nature of the employee’s duties. In the construction industry contractors are liable if their subcontractors fail to supply coverage.
- Sole proprietors and partners are ordinarily not employees and are thus exempt from coverage, but can elect such coverage.
- Corporate officers and managerial members of LLC’s can elect to be exempt by filing a Notice of Election with the Department of Insurance.
- In the construction industry, sole proprietors and partners are considered employees unless they elect to be exempt and pay a $50 application fee.
- No more than three officers or partners may be exempt if the business is in the construction industry.
Businesses (other than in construction) with four or more employees, full-time or part-time, are required to carry worker’s compensation coverage. (An exempted corporate officer or LLC member does not count for such purpose.) Businesses in the construction industry with at least one employee must carry worker’s compensation coverage.
Occupational Licenses
Most businesses and professions are regulated by the Department of Business Regulation (DBR). Some businesses and professions may not be engaged in without being licensed by the state. Counties may impose an occupational license tax (Fla. Stat. §205.032).
Fictitious Names
A business which operates under a name different than its formal name is required to register the fictitious name with the Division of Corporations. The registration fee is $50. If a business fails to comply with the registration requirement, then the business may not defend or maintain a lawsuit until compliance has been effected.
Securities Law
A shorthand way to think of securities is that they are investments in which the return is a function of someone else’s management. Examples are corporate stock, limited partnership interests, or LLC membership interests if someone else is in control. But other investment vehicles can also be securities, such as a high-interest unsecured note to a financially weak corporation.
The sale of securities is regulated by both Federal and state law. Each set of laws provides a remedy for investors against the seller and certain other persons if the securities laws are not followed. The investor’s remedy is the right to rescind the purchase and get a return of the invested money plus interest and attorney fees.
Both Federal and state securities laws require that the securities be registered before they can be sold. Registration is an expensive and time-consuming process. However, each set of laws provides exemptions from registration and sale.
Federal Exemption
The Federal small issue exemption is found in Rule 504 of Regulation D of the Securities and Exchange Commission. Rule 504 provides that registration is not required if:
- The total value of the securities to be sold is not more than $1,000,000
- There is no general advertising or solicitation
- The buyers have no right to resell the securities without registration or an exemption
(There is also a form to be filed with the SEC.)
Florida Exemption
The state law exemption is found in Fla. Stat. §517.061(11). The requirements are:
- No more than 35 investors
- No general advertising or solicitation
- Each investor is given reasonable access to full and fair disclosure of all material information
- No commissions are paid to persons not registered as dealers
- If there are five or more investors, each investor is given a three-day rescission right
If a client intends to raise money from investors by selling membership interests in an LLC, a Subscription Agreement is typically prepared to help qualify the sale of securities for both Federal and Florida exemptions. At minimum, it informs investors of:
- The three-day rescission right
- Their right to information
- The fact that securities are not registered and cannot be resold without exemption
If an investor sues to rescind on the grounds of unlawful violation, the defendant(s) have the burden of proving entitlement to the exemption. If the sale was unlawful or fraudulent, Fla. Stat. §517.211 gives the investor the right to rescind and recover investment plus interest and attorney fees from the seller and any officer/partner/agent who personally participated in the sale.
