How to Start a Sole Proprietorship in Florida
If you are tired of working as an employee and want to expand your opportunities to make more money, maybe starting a business is the right option for you. Many people think that starting a business is expensive. However, you can get started with a sole proprietorship in Florida right now in four easy steps.
What is a sole proprietorship?
A sole proprietorship is a small or unincorporated business owned by one person, which is known as the sole proprietor. In most states, sole proprietorships are unregistered and run solely by one individual.
Sole proprietorships can also hire employees if they obtain an employer ID number from the IRS, but if you don’t want to go through the process of hiring an employee because you don’t need full-time assistance, you can always hire an independent contractor instead. Instead of needing a W-2 form for your employee, you can give them a 1099 form instead for tax purposes.
Examples of a sole proprietorship
Examples of a sole prop include: Artists, freelancers, IT consultants, local grocery stores, barbers, small accounting firms, and more.
What qualifies your business as a sole proprietorship?
As long as a business is unincorporated and is solely owned by one person, it can qualify as a sole proprietorship. Two or more people owning a business means it can qualify as a corporation, LLC, or general partnership.
Sole prop vs LLC
A sole proprietorship is a business that is part of your personal assets, while a limited liability company (LLC) is a business that is a separate entity. Filing for an LLC could take more paperwork and legal documents, but many small businesses that are growing switch to an LLC for liability protection, business tax, and sales tax purposes. LLCs will cost more money to start, while a sole prop requires less capital and fewer filing fees.
Who is it best for?
A sole prop is best for new business owners who want to test out the waters first. Without needing too much capital or paperwork, you can start a small business and bring your ideas to life. Although it might be a little riskier than opening an LLC that provides protection, a sole prop is best for people with low capital, as you can always expand and form an LLC later.
Let’s say you already have a feasible business idea. It doesn’t have to be big at first, and you can start without quitting your day job. You can start with an idea based on your skills and what your community needs. After solidifying the business structure, products, business activities, and services, you are already on your way to becoming a sole proprietor.
How to start a sole proprietorship in Florida
When filing for a sole prop in Florida, there is not a lot of paperwork involved. Because you can start operating your business without registering with the Secretary of State, all you need is to obtain the necessary business licenses related to your business.
A Florida sole proprietorship doesn’t need to register with the state. However, there are a few things you need to do locally, such as getting the appropriate licenses, permits, zoning clearances, etc. You can operate a sole prop in Florida without holding annual business meetings and don’t need to appoint a board of directors.
Is there any formal paperwork filed to establish this type of business?
In Florida, sole proprietorships do not need to register with the state or need any formal paperwork. However, you have the option to file a DBA (doing business as), which allows you to do business under a different name. Also, some businesses still require you to obtain necessary permits, especially for special practices like accounting or barbering.
Naming your business
When choosing a name for your business, you may want to select one that fits the nature of your business. With an appropriate name that describes what your business is all about, you have a higher chance of getting people more interested.
Using your own name
Sole proprietorships usually do business under your own name. However, you still have the option to file for a trade name if you wish to do business under a different name. Although you don’t need to register your business with the state, you can file for a DBA or fictitious name to legally operate under a different name.
Setting up a DBA
Another option is to file for a DBA name. The fictitious name registration in Florida is quite easy. All you need to do is come up with an appropriate name for your business and register it for a DBA. Although it is not required, a DBA name is ideal for most small businesses.
To see if your name is available, you can check the Florida Department of State Database and file the name online here. You can also file for a trade name at your local county clerk’s office, but be sure to fill out this trade name form first.
Some businesses require licenses and permits to operate legally. For example, bars and convenience stores require a liquor and tobacco license to sell alcohol and tobacco. Other professions also require licenses, such as accountants, barbers, tattoo artists, etc.
If you want to know what types of licenses your business might need, you can check the Florida Division of Corporations list using the Sunbiz portal on the Florida Department of State website.
When filing taxes with the IRS as a sole prop, there is no need to file a separate tax return for your business. Instead, the business owner will only need to file federal tax under their legal name and social security number with no distinction between the business and the owner.
Unlike LLCs and any other incorporated business entity, a sole proprietorship is entitled to all profits. However, they will also be responsible for the business’s debts, liabilities, and losses. If the business goes bankrupt and falls into debt, the sole proprietor will have personal liability and pay with their personal assets.
- Sole props are easy to set up
- Sole props are cheaper to set up, and you can start almost immediately
- There is no need for annual reports, meetings, and filings
- The business is not restricted by a formal business structure
- You are entitled to all business assets
- You are liable for every debt of your business without protection
- Raising money might be difficult
- Sole props don’t usually get credit lines or loans
Can you get funding to form a sole proprietorship in Florida?
You can get funding for your Florida business if you don’t have enough capital to start. For smaller business entities like a sole prop, it is better to pitch your idea to people you know first, such as friends and family members. However, you can also go to private lenders, but make sure you have a comprehensive business plan and details on how you can make the business grow.
Can you hire employees as a sole proprietor?
Most sole proprietorships don’t really need employees. However, if you need the extra set of hands, you can hire employees once you obtain an employer identification number, or EIN, from the IRS. If you don’t need full-time help, you can consider freelancers as a new hire, or independent contractors.
Is a DBA name required for sole proprietorships in Florida?
A DBA isn’t required for sole proprietorship in Florida. However, you will need one if you are planning to do business under a different business name. Having a DBA also allows you to have a nickname for your small business, but it does not make your business a separate legal entity.
Can you open a business bank account as a sole proprietor in Florida?
You can open a business bank account once you have filed for a trade name. This allows you to get paid and receive business payments directly to a business bank account instead of your personal account.
How long will it take to start operating a sole prop in Florida?
Considering you have all the paperwork you need, you can start operating your Florida sole prop almost immediately, especially if your nature of business doesn’t need that many permits and licenses to start. The average time is around 2 weeks, but it will still depend on the business owner having everything they need to operate.
How much will it cost to start a sole proprietorship in Florida?
The cost of starting a sole prop in Florida depends on the type of business. Some businesses require a larger capital. But if you only compute the paperwork, starting a sole prop in Florida can cost anywhere between $50 to $300.
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