Small Business Advice

How to start a sole proprietorship in Florida

Looking to start a sole proprietorship in Florida? We've listed some important steps to follow when establishing a sole proprietorship in that state.

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The term "sole proprietorship" means a business owned solely by one person. Sole proprietorships are the simplest business structure in Florida and other states because they are run by an individual, there's no need for registration or formal paperwork, and income is taxed as personal income. However, there are still rules and regulations on the formation of sole proprietorships.

Do I need to register a sole proprietorship in Florida?

No! In Florida, sole proprietors don’t need to file legal documents with the state to establish their businesses. However, as mentioned above, there are guidelines for setting one up.

How to establish a sole proprietorship in Florida

Choose a business name

Florida allows sole proprietors to either use their own names or trade names. It's also possible to use an assumed name (such as a synonym, alias, or false name). When selecting a name, it's recommended to go for names that aren't similar to other registered business names in order to avoid trademark issues.

Florida has a state database you can use to search for unique business names[1]. You can also use the USPTO (U.S. Patents & Trademark Office) to ensure you avoid intellectual property issues related to business/trade names.[2

Besides selecting a business name that is unique, available, and free of intellectual property issues, the business name you choose should reflect your brand. In some cases, it's not advisable to use your name as your business name. However, the nature of your business should inform your decision.

Other considerations should also be made when choosing a business name for a sole proprietorship. For instance, it helps to think about the ethos of your business in relation to its name. You should also consider how the name looks on your logo or letterhead and if there are any negative connotations linked to the name you choose.

File a trade name

If you use your actual name (legal name) as your business name, you don’t need to register the name. However, individuals who select business names that are different from their legal names must register those trade names.

Before a trade name is filed in Florida, it must be published in the local daily/newspaper where the business will be located. Trade names are filed using a trade name form[3]. The form should be mailed to the address indicated at the bottom. Alternatively, trade names can be filed online via the Florida Fictitious Name Registration[4]. You are required to provide some business and personal information on the trade name form. Some fees must also be paid for the registration to be processed and completed.

Filing a trade name is critical for doing business. Many banks require proof that you have filed a trade name before they can open a bank account for your business. The state regulations on filing trade names are contained in Florida Statutes - Section 865.09.[5]

Get business licenses

Your sole proprietorship will have to meet some licensing obligations based on the nature of your business. To know the exact licenses and/or permits required for your business, visit DBPR – the agency responsible for regulating most professionals in Florida. The DBPR (or Department of Business & Professional Regulation) website has a comprehensive list of who it regulates and the licenses required.

However, sole proprietorships owned by professionals in legal and health care sectors aren’t licensed by the DBPR. Sole proprietors who can’t find their licensing and regulatory requirements on the DBPR website can check the state agency directory to identify the appropriate agency.[6]

If you intend to conduct business involving construction or related professions, it helps to check local regulations, zoning clearances, building permits, and other rules/requirements that may apply to your business. Generally, some businesses will require federal licenses & permits in Florida. For instance, businesses in Florida that conduct agricultural activities like transporting animals, animal produce, plants, biologics, or biotechnology from Florida to other states require a USDA permit.

A sole proprietorship that deals firearms, ammunition, and explosives will require additional licensing from the ATF.[7] Businesses in transport and logistics should also meet the U.S. Department of Transportation requirements. It helps to research widely or consult Florida business registration experts to ensure you meet all licensing and permit requirements applicable to your business.

Get an EIN number

Sole proprietors with employees need EINs (Employer Identification Numbers). An EIN is a 9-digit no. provided by the IRS. Every business with employees in Florida and every other state in the U.S. must report the wages of their employees to the IRS via the EIN. You can apply for an EIN via the IRS website. [8]

If your sole proprietorship doesn’t have employees, you don’t need an EIN. You can use your social security number to report taxes. However, an EIN may still be important since some banks require it to open a bank account for your business. This measure reduces identity theft risks.

Open a business bank account

While sole proprietors are free to use their personal bank accounts, a business account separates personal from business finances. As mentioned, you may need your EIN to open a bank account for your business, although some banking providers, like Nearside, do not require an EIN.

Get business insurance

Once you've set up your sole proprietorship in Florida, it’s a good idea to acquire liability insurance. As mentioned, sole proprietors have personal responsibility over the debts and other liabilities faced by their businesses. Depending on the type of coverage, business liability insurance can reduce or eliminate unfavorable exposure.

Most importantly, insurance may be mandatory in some cases. Florida law requires mandatory workers' compensation insurance for businesses that employ four or more people.[9]

Reporting and paying taxes

Florida has certain tax reporting and payment obligations that may be applicable to a sole proprietorship. This is usually based on the specific business activity in question. You should investigate your eligibility for taxes with the Florida Department of Revenue. If such taxes are applicable to you, register online. Alternatively, you can follow the paper application process that requires you to complete and submit Florida’s Business Tax Application form.[10]

Sole proprietorship vs. LLC

Pros and cons of a sole proprietorship

Understanding the advantages and drawbacks of a Florida sole proprietorship is important before you establish one. Here are the main pros:

  • Easy and cheap to form: Sole proprietorships don't need state registration. They can also operate without other tedious and costly requirements and formalities affecting corporations.
  • Complete control: A sole proprietor has complete control over all aspects of their business. They can make decisions faster without consulting anyone.
  • Less complicated tax filing and reporting: Since sole proprietors with no employees can report taxes using their social security numbers, they have fewer tax preparation issues that include getting EINs and filing as businesses.

Sole proprietorships also have cons, the main ones being:

  • Personal liability: Since a sole proprietor is personally responsible for the liabilities of their business, they can lose their personal property if the business incurs debts. While insurance can help, it comes with added costs.
  • Difficulty raising capital: The structure of a sole proprietorship may not be conducive to attracting investments. You may need to convert your business into other forms to take on investment. It's also harder to get bank loans as sole proprietorships are generally considered to be riskier than companies.
  • High workload: Sole proprietors who don't have employees tend to get overwhelmed since they undertake all business functions.

Pros and cons of an LLC

If you establish an LLC in Florida, you stand to enjoy the following pros:

  • Better protection: When compared to sole proprietors, the personal property of business owners of LLCs is protected from the LLC's debts and other liabilities.
  • Tax benefits & flexibility: An LLC enjoys the same pass-through taxation as a sole proprietorship, or can elect to be taxed as a corporation.
  • More members: You are free to have more business owners in an LLC which comes with advantages like expertise and a larger capital pool.
  • More credibility: LLCs appear more credible than sole proprietorships thanks to the “LLC” at the end of their business name.

Some of the main cons of LLCs include:

  • Increased paperwork: In Florida, LLCs need to do more paperwork to establish than sole proprietorships.
  • Unable to issue shares: If you choose an LLC over a corporate structure, you will not be able to issue shares, because there will be no shareholders. Sole proprietors are not usually interested in issuing shares, however, so this is likely not an issue.
  • Higher formation costs: Unlike a sole proprietorship, registering an LLC will come with startup as well as annual/biannual fees in whichever state you choose to operate in.

Frequently asked questions

Does a sole proprietor need a DBA in Florida?

No. If you use your legal name, there's no need for a trade name or DBA (doing business as). However, it may be better in some instances to get a trade name i.e., when doing so adds credibility to your business or removes negative connotations that may be linked to a name.

How do I look up a sole proprietorship in Florida?

Florida has a special database that lists all business names and trademarks in existence.

How do I check my SunBiz status?

Visit SunBiz website and input your tracking number to check the status. Certificates of status are available for reprinting a day after creation.

References

[1] Florida Department of State -  https://dos.myflorida.com/

[2] US Patent and Trademak Office -  https://www.uspto.gov/trademarks

[3] Florida Department of State - https://dos.myflorida.com/

[4] FL Fictitious Name Registration -  https://efile.sunbiz.org/ficregintro.html

[5] Online Sunshine - Official site of Florida Legislature - http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0800-0899/0865/Sections/0865.09.html#:~:text=(a)%20A%20person%20may%20not,The%20name%20to%20be%20registered.

[6] Florida Department of State - https://dos.myflorida.com/library-archives/research/florida-information/government/state-resources/state-agency-homepages/

[7] ATF Bureau - https://www.atf.gov/#:~:text=ATF%20is%20a%20law%20enforcement,and%20the%20illegal%20diversion%20of

[8] IRS - https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online

[9] Online Sunshine - Official site of Florida Legislature - http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0400-0499/0440/0440.html

[10] FL Department of Revenue -  https://floridarevenue.com/Pages/default.aspx

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