Predating the outbreak of COVID-19, many companies considered moving their business operations out of high-tax jurisdictions to the Sunshine State, with many ultimately making the move in recent months. Where ‘working from home’ is the new ‘norm’, businesses are reevaluating more than ever where to maintain offices.
While the asset management industry operates throughout the United States, South Florida is quickly becoming an important center for financial services.
The appeal of low tax rates on businesses
Most states impose an income tax on corporate entities, so operating in a state with a lower corporate income tax rate can be favorable if a business is structured as a corporation.
Asset managers are typically structured as pass-through entities, which are generally not subject to a corporate income tax. However, states where asset managers are formed as partnerships tend to be jurisdictions that impose a high personal income tax. In addition, there are several states and municipalities that also impose taxes on a pass-through entity’s income or receipts.
Below you will find an illustration of corporate and flow-through taxes for businesses in key jurisdictions.