How to Start a Florida Sole Proprietorship

What is a sole proprietorship?

A sole proprietorship is a business that has one owner and is unincorporated. As a sole proprietor, you have full control over the business, its operations, and its profits and actions—and you also take full liability for any debts and losses it incurs.

Sole proprietorship pros and cons

Sole proprietorships have a few benefits over other types of business entities:

• Ease of formation. Sole proprietorships don’t require the same level of paperwork as a limited liability company (LLC) or corporation, nor does it require any fees to get started.
• Tax advantages. Sole proprietors are self-employed business owners, and their business profits are taxed as individual income. This is known as pass-through taxation.
• Full control of the business. Sole proprietors are able to make their own business decisions without consulting partners, shareholders, or members, allowing for full autonomy over the company.

There are also a few disadvantages that business owners should consider before deciding to open a sole proprietorship:

• Full, unlimited liability. When you’re a sole proprietor, there is no legal separation between your business and yourself. You are personally liable for any debts your business incurs, and your personal assets could be at risk if your business falls into financial or legal trouble.
• Difficulty securing capital. Sole proprietors may have a more difficult time getting financing due to the added risk they assume under this business type. Many sole proprietors have to fund their businesses entirely from their personal accounts.
• Lack of corporate tax benefits. While it’s nice to avoid double taxation (that is, paying taxes on both earnings and profit distributions), sole proprietors also can’t take advantage of the same tax write-offs available to corporations.
• Limited potential for growth. Because they have limited access to capital, sole proprietors may find it difficult to grow and expand their business unless they transition to an LLC or corporation.

How to start a sole proprietorship in Florida

You can start a sole proprietorship in Florida by following a few simple steps.

Step 1: Choose a business name

Florida law allows you to use your own name in running a sole proprietorship. Likely, you will choose to run your business under a different name. If so, you should run a search of names to see if those names sound similar to your chosen business name. If the name is similar, you could face trademark infringement issues. 

One way of running a search is by going to the Florida Department of State's website and the U.S. Patent and Trademark Office's website to see whether your business name is unique. 

If you need help coming up with an original business name, you can try LegalZoom’s AI-powered business name generator to help spark inspiration.

Step 2: Register a DBA name (if needed)

If you’re using anything other than your legal name as your business name, you may want to consider filing a fictitious name (also known as a “DBA” or “doing business as”) with the Florida Department of State. Filing a DBA offers a few benefits, but the main one is that it provides an added level of privacy since you don’t need to file under your legal name.

You can find the necessary forms to file a Florida DBA at the Florida Department of State Division of Corporations website. The filing fee is $50.

Step 3: Obtain necessary business licenses or permits

You might not have as many hoops to jump through when it comes to starting your business as a sole proprietorship, but you still need to obtain any business licenses or permits you need to stay in compliance with state, federal, and local laws. 

Getting a business license in Florida is a little easier than many other states, since Florida only requires state-wide business licenses for a select few industries. But you will likely need a local business tax receipt for your country and a Florida sales tax license. And, if you work in any industries regulated by federal agencies—such as alcohol sales, agriculture, or transportation—you’ll need to obtain those federal licenses as well.

Step 4: Consider getting an EIN

The Internal Revenue Service (IRS) issues an employer identification number (EIN) to a business for tax purposes. It’s essentially like a Social Security number for your business. You can register for an EIN on the IRS website or hand over the task to an EIN registration service like LegalZoom.

Note that only sole proprietorships with employees must register for an EIN. Even if your sole proprietorship does not have employees, you may nevertheless choose to register for an EIN because it provides some advantages. For instance, some banks require an EIN for opening a business account.

Step 5: Set up finances

Even though, as a sole proprietor, your personal and business life are intertwined, you should still consider opening a business bank account for your sole proprietorship. This can make it easier to keep your business finances separate from your personal ones.

Depending on the complexity of your business, you may also wish to purchase bookkeeping or accounting software programs to help you keep track of your income and expenses. And, as a self-employed business owner, you’ll also need to familiarize yourself with the ins and outs of self-employment tax, which may include paying estimated quarterly taxes on the money you make.

Sole proprietorship vs. LLC in Florida

Sole proprietorships and LLCs are two common business structures, each with its own advantages and disadvantages. Sole proprietorships offer a quicker and simpler setup process, and allow you to retain full control over your company. But LLCs offer a number of benefits that can make the extra initial effort well worth it. Not only do they limit the amount of personal liability you assume for your business, but they also make it easier to scale and grow your business by providing easier access to capital.