Florida Residency for Business Owners & Entrepreneurs

Florida has no personal income tax, which means pass-through income from S-Corps, partnerships, LLCs, and sole proprietorships is not taxed at the state level when the owner is a Florida resident. In contrast, states like California (13.3%), New York (10.9%), and New Jersey (10.75%) tax pass-through income at high rates. By establishing Florida residency, your business profits flow through to you tax-free at the state level.

Florida does not impose state income tax on S-Corporation shareholders' pass-through income. Florida does have a corporate income tax (5.5%), but it only applies to C-Corporations, not S-Corps. Since S-Corp income passes through to shareholders and is taxed at the personal level, and Florida has no personal income tax, S-Corp owners in Florida pay 0% state tax on their pass-through business income.

For pass-through entities (S-Corps, LLCs, partnerships), your personal state of residence determines where your share of business income is taxed. You don't necessarily need to move the business entity to Florida—changing your personal domicile is what eliminates your state income tax. However, if your business has nexus in other states (employees, offices, significant sales), those states may still tax a portion of the business income sourced there.

State sourcing determines which state can tax business income. Key factors include: where services are performed, where products are delivered, where employees work, and where the business has physical presence. Even after moving to Florida, if your business has operations in other states, those states may tax income attributable to activities within their borders. Florida's advantage is that it never taxes you on income from operations outside other taxing states.

Florida LLCs offer several advantages: no state income tax on LLC members, strong charging order protection (creditors can only get distributions, not seize membership interests), no requirement to disclose members in formation documents (privacy), no state franchise tax on LLCs, and favorable business courts. Combined with Florida's homestead exemption for your primary residence, the asset protection package is among the strongest in the US.

Many high-tax states tax capital gains at the same rate as ordinary income (e.g., California at 13.3%). By establishing Florida residency before a liquidity event (business sale, stock sale, real estate sale), you can potentially eliminate state-level capital gains tax entirely. Timing is critical—ensure your domicile change is completed and documented well before the taxable event. Consult a tax professional for your specific situation.

Savings depend on your current state and income. A business owner with $300,000 in pass-through income from California could save approximately $25,000+ annually. From New York, savings could be $20,000+. For a business sale generating $1M+ in capital gains, avoiding state capital gains tax could save $50,000-$130,000 in a single year. Florida residency eliminates one entire layer of taxation on business profits.

S-Corp owners can set a "reasonable salary" and take remaining profits as distributions, reducing self-employment tax. In Florida, both the salary and distributions are free from state income tax. In high-tax states, both components are taxed at the state level. Florida residency makes the S-Corp strategy even more powerful because you save on state tax for both your salary and your distributions.

Not necessarily. You can maintain your business entity in its current state while changing your personal domicile to Florida. However, you should evaluate whether it makes sense to domesticate (move) your entity to Florida or register a new Florida entity. Factors include: your current state's dissolution rules, outstanding contracts, licenses tied to the entity, and whether the entity has employees or offices in the original state.