LLC vs Corporation: How Are They Taxed in Florida in 2026?

When Florida business owners ask "should I form an LLC or a corporation?", the most important factor is usually taxation. LLCs and corporations are taxed very differently at both the federal and state level - and the "right" structure depends on your income level, plans for investment, and long-term goals.

This guide breaks down exactly how LLCs and corporations are taxed in Florida, using plain numbers and clear comparisons - not legal jargon.

How LLCs Are Taxed in Florida

Default: Pass-Through Taxation

By default, a Florida LLC does not pay tax at the entity level. Instead, profits and losses "pass through" to the members' personal tax returns. The IRS calls this:

• Disregarded entity (single-member LLC): Reported on Schedule C of the owner's Form 1040. The LLC is invisible for federal tax purposes.
• Partnership (multi-member LLC): Files Form 1065 (informational return) and issues K-1 schedules to each member. Profits are taxed on each member's personal return based on their ownership percentage.

In Florida, because there is no state personal income tax, pass-through LLC income avoids both the entity-level tax and the state-level personal income tax. You pay only federal income tax and federal self-employment tax.

Optional: S Corporation Election

An LLC can elect to be taxed as an S corporation by filing IRS Form 2553. The LLC remains an LLC under Florida law, but the IRS taxes it differently: the owner-employee pays themselves a reasonable salary (subject to employment taxes), and remaining profits are distributed free of self-employment tax.

This election can produce significant savings for LLCs with annual net income over $50,000-$60,000. See our dedicated article on the S corporation election for a full breakdown.

No Florida Corporate Income Tax for LLCs

Florida's 5.5% corporate income tax applies only to C corporations and LLCs that elect C corporation tax treatment. LLCs taxed as disregarded entities, partnerships, or S corporations are not subject to Florida's corporate income tax.

How C Corporations Are Taxed in Florida

Federal Corporate Income Tax: 21%

Under the Tax Cuts and Jobs Act (2017), C corporations pay a flat federal corporate income tax rate of 21% on net taxable income. This is the entity-level tax.

Florida Corporate Income Tax: 5.5%

Florida imposes a corporate income tax of 5.5% on net income from Florida operations (net income over $50,000, after a $50,000 exemption for small C corporations). This applies to C corporations and to LLCs that have elected C corporation tax treatment with the IRS.

Double Taxation on Dividends

When a C corporation distributes profits to shareholders as dividends, those dividends are taxed again at the shareholder level - at the qualified dividend rate (0%, 15%, or 20% depending on the shareholder's income). This is "double taxation": the corporation paid 21% + 5.5%, and now the shareholder pays another 15-20% on what is left.

Example: A C corporation earns $100,000. It pays $21,000 in federal tax and $2,750 in Florida tax (on income over $50,000). The remaining $76,250 is distributed as a dividend. At a 15% qualified dividend rate, the shareholder pays another $11,437. Total tax on $100,000: $35,187 (35.2% effective rate).

The S Corporation: Avoiding Double Taxation

Both an LLC and a corporation can elect S corporation tax treatment, which avoids the double taxation problem. S corporations are pass-through entities - profits flow to shareholders, who pay tax on their personal returns. There is no entity-level federal income tax for S corporations.

Florida also does not impose its corporate income tax on S corporations. S corporation income passes through to Florida shareholders, who pay no state income tax on it because Florida has no personal income tax.

The key limitation: S corporations have eligibility restrictions. No more than 100 shareholders, only U.S. citizens or resident aliens as shareholders, and only one class of stock. These restrictions make S corporations unsuitable for businesses raising venture capital or with complex cap tables.

Side-by-Side Comparison

When Does Each Structure Win?

LLC (Default Pass-Through) Wins When:

• You are a sole owner or small team with manageable income levels
• You want simplicity and no separate corporate tax return
• You are a real estate investor (rental income typically not subject to SE tax anyway)
• You plan to hold assets long-term rather than sell

LLC with S-Corp Election Wins When:

• Annual net income consistently exceeds $50,000-$60,000
• You actively work in the business (as opposed to passive investment)
• You want to reduce self-employment tax without the complexity of a C corporation
• You have no foreign owners and fewer than 100 shareholders

C Corporation Wins When:

• You are raising venture capital or issuing preferred stock to investors
• You want QSBS eligibility (IRC Section 1202 gains exclusion)
• You are planning for an IPO or strategic acquisition
• You want to retain profits inside the company at the 21% corporate rate rather than distributing them
• You need employee stock options (ISOs) as a recruiting tool

Frequently Asked Questions