The Sunshine State is home to the fourth-largest economy in the nation, according to data from the Bureau of Economic Analysis. While Florida’s economy contracted 2.8% in 2020, it shrunk less than the United States as a whole, which decreased 3.4% in 2020.
Small businesses are an essential part of Florida’s economic landscape, making up 99.8% of all Florida businesses and employing 3.6 million employees – more than 41% of the state’s workforce, according to the U.S. Small Business Administration (SBA).
Per SBA data, these are the top six industries for small business employment in Florida:
These positive economic indicators are encouraging for the state, but they only tell part of the story. To understand the opportunities and challenges facing entrepreneurs in Florida, we’ll need to take a closer look at several factors.
U.S. News ranked Florida’s economy eighth in the nation based on its growth, employment and business environment.
Florida is generally known as a state with an overall low tax burden. It is one of the nine states that don’t have a personal income tax, making it a highly attractive location for pass-through entities, such as LLCs and S corporations.
The state sales tax is middle of the road on taxes for rented or purchased goods at 6%, but when you add the average 1.05% local tax added to transactions, the average sales tax is 7.05%. Necessities such as groceries and medicines – and business expenses like new machinery and equipment – are exempt from sales tax, and Florida has a sales tax holiday in August when families are doing back-to-school shopping.
Corporations in Florida must file a corporate income tax return, but at a low top rate of 5.5%. In addition, unemployment insurance taxes are low at 2.7% for new employers; property taxes are also relatively low, although rates vary by county.
“Florida doesn’t have a state income tax or some of the other nuisance business taxes found in other states,” said Robert Livingstone, president and founder of IdealCost.com.
Some business owners are uprooting their businesses to move into Florida due to the small business tax advantages. Daniel DiGiaimo, CEO of Baker Street Funding, relocated his company from New York City to Florida specifically to reduce its tax burden.
“[One reason we moved to Florida] is because of the tax benefit,” he said. “Moving from a city with one of the highest tax rates in the country to a state with no state tax is a huge savings both personally and professionally.”
Florida can afford to keep tax rates low because it relies on hospitality tax revenue from its tourism businesses, including theme parks, hotels and resorts. Local governments may also levy additional tourism taxes.
Entrepreneurs also report sufficient access to capital for starting and growing their business in Florida. The state is home to significant investment capital from venture capitalists and angel investors.
“The idea that you have to be in huge metropolitan areas like New York or Silicon Valley for access to capital is overblown,” said Andy Latimer, founder and CEO of Bluewater Media. “The stable business environment in Florida makes business here ripe for investment. Also, the walls of access to large markets have been broken down by technology.”
It wasn’t always the case that Florida attracted private investment capital. In recent years, however, investors have turned their eyes to the Sunshine State. Today, Florida is home to several economic hubs considered incubators of innovation and startups. For example, the Florida High Tech Corridor Council supports high-tech industries with investments, resources and initiatives across 23 central Florida counties.
“Whereas Florida used to be a state largely excluded from the startup and VC scene, things have changed considerably over the last five years,” said Zohar Pinhasi, CEO of MonsterCloud. “I now see it as a promising and cost-effective location for buzz-worthy startups.”
The cost of living in Florida is slightly higher than the U.S. average across the board, but it remains more affordable than other major economic hubs in the country. This means entrepreneurs can plug into a humming business landscape at a reasonable cost, though housing and transportation costs are somewhat pronounced.
“The cost of living and operating a business is still generally significantly lower than in New York, Chicago, D.C., San Francisco or LA,” Pinhasi said.
Prices fluctuate based on locality, of course. For example, Miami tends to be more expensive than other major metropolitan areas in the state, such as Jacksonville or Tampa Bay. For businesses with physical locations, real estate costs vary widely, so it’s important to research local markets.
Florida’s minimum wage is $10 as of September 2021, but it will go up by $1 each year until it reaches $15 in September 2026. Florida labor laws do not say anything about overtime payment requirements, but federal overtime laws apply.
There are no Florida laws requiring employers to provide employees with severance pay if someone is let go. There are also no state laws requiring employers to provide employees with vacation benefits or sick leave, either paid or unpaid.
Florida – which falls in the subtropical to tropical temperature zone – is widely known as a tourist state, and with that reputation comes a significant seasonality that impacts many businesses.
In spring and summer, when the weather is nicer in the northern states, fewer tourists and snowbirds spend their time and money in Florida. That means business slows significantly for the entrepreneurs that operate in Florida year-round.
Running a business in Florida means you must prepare for the lean months by keeping operations efficient and wisely allocating your revenue from the busy season, typically regarded as the time between Thanksgiving and Easter. However, businesses can take advantage of the more available and less expensive labor that comes in the summer months, as those hired for the season find themselves without a job.
“If you own a corner store or restaurant or daily staples business dependent on foot traffic, your small Florida business from Thanksgiving to Easter will be packed with snowbirds clamoring for everything [they] forgot back in Jersey or ‘the City,'” said Baron Christopher Hanson, lead consultant and owner of RedBaron Consulting. “If you are looking to open an aging healthcare or routine medical practice, be prepared to be busy from November to May, yet very slow in the summer and hurricane months.”
Beyond the seasonal downturns, hurricane season also poses a threat to businesses. Customers regularly evacuate to avoid hurricanes, and the storms represent a disaster risk that could result in significant damage to brick-and-mortar businesses.
“Hurricane season brings a lot of uncertainty to the market,” Livingstone said. “When we need to reach current and prospective clients during this time, we aren’t always successful on our first and second attempt. South Florida has escaped mostly unscathed during the last few years, but often we see people prepare and evacuate due to past experience.”
That said, hurricane season can be a boon for certain types of businesses, such as roofing and construction companies, hardware stores, and grocery stores.
Florida’s relatively low unemployment rate is an indicator of its strong economic performance, but this statistic comes with a drawback: Recruiting new employees is a competitive and costly process. Moreover, as in many other parts of the country, Florida has an employee’s labor market, making it difficult to retain existing talent. Other companies are prepared to offer lucrative compensation packages to lure the best candidates.
Unemployment is projected to continue falling throughout 2022, and job growth in Florida will outpace the overall U.S. economy. The hospitality sector will experience the most job growth as it recovers from the pandemic. Balancing this is a steady influx of new job seekers who will continue to move to Florida. Southeast Florida, in particular, has a large workforce, followed by the Tampa Bay region.
While there are several top universities in Florida from which businesses can easily recruit, high salaries and wages, attractive benefits packages, and job perks like remote work and paid time off (PTO) policies are becoming standard tools for attracting workers. Businesses should be prepared to compete to secure the most skilled or experienced employees in their industry.
Business owners frequently ask the following questions when starting a business in Florida. The answers will help you file the necessary documents, pay the appropriate fees, and understand the basics of starting a business in Florida.
According to the SBA, there are about 2.8 million small businesses in Florida. They make up 99.8% of all businesses in the state and employ 3.6 million workers, about 41.1% of the state’s private-sector workforce.
To start a business in Florida, you should first check with the state Department of Business & Professional Regulation and your county’s tax collector to determine whether your business requires a license. You also must register your business with the Florida Department of Revenue along with the federal IRS.
If you are operating a corporate entity or a business with a fictitious name, you must also register your company with the Florida Department of State. For more information on the process of starting a business in Florida, visit the state Division of Library and Information Services website.
The cost of starting a business depends on the exact nature of your company. However, all businesses are subject to a $100 fee to file articles of organization with the Florida Secretary of State’s office, as well as a $25 registered agent fee.
In addition to these costs, you might be required to secure a business license and business insurance. If you wish to obtain a copy of your articles of organization, the state charges an added fee of $30, as well as a $5 fee for a certificate of status.
Florida has several industries that are somewhat unique to the state (or relatively rare). First, there are multiple theme parks, including the Disney and Universal parks in the Orlando area and Busch Gardens in the Tampa area. Second, tourism is a huge part of the Florida economy, including hotels, tours, museums and souvenir shops.
Because of Florida’s extensive coastline and warm weather, watersport businesses abound, such as jet ski and boat rentals, surfing and paddleboarding lessons, and fishing charters.
Finally, South Florida’s proximity to Central and South America and the Caribbean makes it an international business hub. In South Florida, proficiency in Spanish and (to a lesser extent) Portuguese is a plus.
Florida does not require businesses to carry commercial liability insurance, although it is wise to carry some insurance to protect your assets. If your business operates cars or trucks, you must purchase a commercial vehicle policy and review the Department of Transportation’s hours of service regulations for commercial fleets.
Workers’ compensation insurance is mandatory for any company with at least four employees in Florida (whether they work full time or part time), as well as construction companies, regardless of size, and agricultural companies with at least six regular employees or 12 seasonal workers. Employers must report claims within seven days after they are notified of an accident or injury.
“If an employer’s late reporting of a claim delays the payment of an injured worker’s benefits, the state of Florida can penalize the business,” said Karen Phillips, general counsel to the Florida United Businesses Association’s workers’ compensation insurance program.
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Most businesses must obtain a business license to operate in Florida legally. A general business license is called a “business tax receipt” and can be obtained when you register your business with the county tax collector.
Additional licenses and permits, as well as their costs, will depend on the type of business you operate and its location. Failure to obtain the proper licenses and permits for your business could result in fines and, ultimately, the closure of your business.
The cost of obtaining a business license in Florida is generally less than $100. However, it could be higher if your business requires additional licenses or permits. When launching your business, check with local, county, and state officials to understand your specific obligations under Florida law.
In Florida, the standard processing time to form your LLC is six to eight business days, which is relatively fast by national standards. An expedited filing in Florida could process as quickly as two or three business days. Processing times are never guaranteed and are subject to the speed with which government offices are able to review and approve all filings.
Under Florida law, businesses are required to file for a DBA if they plan on using a different name from their registered name. To file a DBA, first ensure your intended name is available by searching the state’s Fictitious Name database. If your desired DBA is available, you can file paperwork claiming the name in the Online Fictitious Name Registration service. Once approved, the DBA is registered for five years, after which it would need to be renewed.
Florida state law requires all employers to report any newly hired or rehired employees to the state directory within 20 days of their start date. This includes self-employed individuals who must report themselves as new hires to the state. Independent contractors, however, are exempt from the law.
If you’re a small business owner in Florida looking for resources to help move forward, here are a few organizations you might want to learn more about.
The Florida Department of Economic Opportunity is a government agency that can help you recruit employees and find tax credit and incentive programs. It will also inform you about labor regulations in the state.
Enterprise Florida is a public-private partnership that provides research on Florida’s business growth opportunities along with news focusing on trade and export development and defense.
SCORE’s volunteer business professionals and expert mentors give counsel and guidance to entrepreneurs looking to start or expand their businesses. The services and workshops are free and volunteer-driven.
“We are really able to help new businesses get a foothold,” said Cliff Sullivan, certified SCORE mentor and former chair of the Pinellas County chapter. “We have a lot of wonderful, wonderful resources.”
Here are some of the SCORE chapters in Florida:
The SBA offers financing and grants, as well as consultations and counseling services. There are also opportunities to apply for federal government contracts through the SBA and avenues for obtaining assistance in the wake of natural disasters.
Florida hosts more than a dozen development centers for small businesses. Each is dedicated to supporting the development and retention of small businesses, helping entrepreneurs do everything from crafting business plans to navigating the state’s tax code. Contact your region’s Small Business Development Center to learn more.
Jennifer Dublino contributed to the writing and reporting in this article. Source interviews were conducted for a previous version of this article.