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Quick Reference
The Limited Liability Company is a popular business entity choice structure for many businesses starting in Florida. The LLC provides advantages like personal asset protection and the potential to save money on taxes. With a little research, you can learn how to form an LLC in Florida without an attorney.
Unlike a sole proprietorship or partnership where the small business owner can be held personally liable for lawsuits against the business, the LLC is a separate legal structure, protecting the business owners personal assets.
Besides the liability protection, the Limited Liability Company provides several other benefits over the sole proprietorship, partnership, and corporation because of the multiple tax options, management flexibility, and fewer formalities than the corporation.
Quick Reference
Starting A Sole Proprietorship In Florida
Unlike with other business types like LLCs or corporations, you do not need to register a sole proprietorship in Florida. I
n fact, many freelance workers are likely operating as a sole proprietorship without knowing it. As a result, starting a business as a sole proprietorship is incredibly easy.
However, if you plan to use a name other than your legal name, you will have to register it as a fictitious name. In Florida, a fictitious name is what you might know as a doing business as or DBA name.
You can submit fictitious name registrations to the Florida Division of Corporations either online or by mail. Not including a certified copy, it costs $50 to register a fictitious name.
Before you register a fictitious name for your sole proprietorship, Florida law requires that you advertise that fictitious name in at least one newspaper in the county where the business is located.
Advantages And Disadvantages Of Sole Proprietorships
Starting a business as a sole proprietor is very popular because you can get started without paperwork. Thus, they can be a great option for people looking for the cheapest and simplest way to start a business.
However, sole proprietorships also have some disadvantages that need to be considered. Since a sole proprietorship does not create a separate business entity, they leave the business owner with unlimited liability risk. If a lawsuit is filed against the business or the business has debts that cannot be paid, the owner can be held personally liable. This means that the business and individual who owns the business are viewed as the same and that the owners personal assets can be seized or used to resolve lawsuits or repay debts. This is one of the key differences when comparing an LLC vs a sole proprietorship.
Recommended Content:For a full breakdown, check out our guide on the advantages and disadvantages of sole proprietorships. This guide details the 4 main advantages and disadvantages that new business owners should be aware of when operating as a sole proprietor.
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What Is A Florida Sole Proprietorship
A sole proprietorship is the simplest and most common business structure people use.
Sole proprietorships are unincorporated, meaning they are owned and operated by a single individual.
From a legal perspective, sole proprietorships are much different than other kinds of business structures there is no separation between the owner and the business.
Simpler Taxes Mean Fewer Deductions
Although tax rates may be higher among LLCs and corporations, they are permitted to make certain deductions for business expenses.
Sole proprietors do not have this luxury, and depending on the cost of doing business, you may end up paying more in taxes as a sole proprietor.
To avoid these issues, it is important to speak with a Florida business law attorney or tax professional about your situation. They can help you determine what kind of business structure will benefit your business the most.
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How To Become A Florida Sole Proprietorship
If youre currently self-employed in the state of Florida, or if youre looking to enter the world of one-person business ownership, youve probably looked into becoming a sole proprietor.
The sole proprietorship is the simplest business format in America, but that doesnt mean that there arent rules and regulations to follow when you operate one. In addition, there are some limits to the functionality of a sole proprietorship.
In this guide, we’ll walk you through the steps to setup a sole proprietorship properly, and help you determine whether or not a sole proprietorship is a good choice for your business.
Rocket Tip: Its important to understand that a sole proprietorship does not offer personal asset protection as the LLC does. The LLC is the most popular entity for small businesses and is easy to create by doing forming it yourself or hiring a cheap LLC service.
Select An Appropriate Business Name
A sole proprietor in Florida can use his/her own given name or may opt for trade or assumed business name. However, a tradename sounds more professional than the owners personal name. DBA name plays a pivotal part if you prefer to choose an assumed business name.
The state law requires the DBA must be distinguishable from the companies/businesses that are already on record.
Tidbit
Check the following government databases to make sure your fictitious or DBA name has not been trademarked already.
- Florida Secretary of State
- The United States Patent and Trademark Office
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Forming A Sole Proprietorship In Florida
Unlike other business entities, you dont need to file anything or take any formal actions to form a sole proprietorship. Its the default business structure for any new entity in Florida. That said, youll still need to obtain the necessary permits and licenses required by your jurisdiction and industry. Youll also need to follow state and federal regulations just like everybody else. Youll also need to apply for afictitious name, or DBA, if you want to use a name for your business other than your own legal name. However, before filing for a DBA, its a good idea to perform aname availability searchto make sure that the name isnt already in use.
File The Annual Report
LLCs are required to file an annual report with the Florida Department of State and updates ownership information and other details. The annual report fee is $138.75 and is due the first year following the LLC formation, between January 1st and May 1st. If the report is filed after May 1st, a $400 late fee is added to the cost. If not filed and paid by the 4th Friday in September, the state will dissolve the LLC.
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Easy And Inexpensive Formation
You wont find a business thats less expensive or less complicated to set up than a sole proprietorship. Not only do sole proprietorships not have to register with the state of Florida before they can start doing business they can operate without holding annual meetings or other formalities required of corporations. Theres no need to appoint a board of directors after all, this business is entirely yours.
Protect Your Business Name With A Trademark
Once you confirm the availability of your business name and secure it, you can choose to apply for a trademark for your business. This typically costs around $225 to $400 plus any attorney fees as well as a renewal fee every 10 years.
While this cost can be high for a start-up or fledgling business, it will give your company brand nationwide protection backed by federal law. That means if others try to do business with the same or a similar name as yours, youll have legal precedent on your side. For most small businesses, this really isn’t necessary unless they are thinking of going national.
You may submit both by mail. The LLC form requires a $25 filing fee while the corporation form has a $35 filing fee.
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Name And Address Of Person Authorized To Manage Llc
This section asks for the name and address of each manager or representative who is authorized to manage and control the company. There are three choices listed, but you are free to use any appropriate title. The listed title definitions include:
- The Manager is a person hired to perform the management functions of a manager-managed LLC. This person may or may not be a LLC member
- The Authorized Member is an owner of the LLC
- An Authorized Person is someone authorized to execute and file records on behalf of the LLC. Typically an attorney or accountant.
Register The Business With The State Of Florida
If you are operating your business under a name that is different than your own name, you must apply for a fictitious business name with the Florida Department of State. You can file an Application for Registration of Fictitious Name by mail or online.
The State of Florida Department of Revenue also allows you to register online to collect taxes for any employees.
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Other Reporting For Sole Proprietorships With Employees
If employees receive tips, the sole proprietor must file Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips, to report final tip income and allocated tips.
If the sole proprietor provides employees with a pension or benefit plan, they need to file a final Form 5500, Annual Return/Report of Employee Benefit Plan.
How Are Sole Proprietorships Different From Other Businesses
A sole proprietorship in Florida is the least complex and cheapest form of doing business. It is different from other businesses in the following ways:
- It requires no formal paperwork to set up.
- It doesn’t need to be registered with the state.
- It doesn’t shield individuals from liability for their business debts and any claims made against the business.
- Its income is treated as simple income for tax purposes therefore, you do not need to file separate taxes for it.
If you decide that a sole proprietorship is right for you and your business, you should follow several steps. Deciding on the name of your business is a fun and important step. If you choose to do business under a name other than your own, check to see if another business is already using it. Florida allows two businesses to use the same name, but you’ll want to avoid it to help with your branding and to avoid confusion for your consumers.
In addition to naming your business, you must select a business location. You will need that address to fill out paperwork. You must also register its name, apply for applicable licenses and permits with the Department of Business and Professional Regulation if necessary, and register to pay taxes.
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Choose A Business Structure
The type of business structure you choose to form will determine how you register the business with the state. Use our how to choose a business structure guide to help choose which business structure is best for you, whether its sole proprietorships, general partnerships, limited liability companies , and corporations.
The factors you should consider when choosing a business structure will depend on your needs and wants for personal liability protection, tax liabilities, and paperwork to keep the company in compliance.
Recommended: We typically recommend forming an LLC for most entrepreneurs because this structure comes with personal asset protection, has no double taxation, and is pretty easy to maintain.
If you would like to use a service, read our guide on the best LLC formation services.
How To Become An Iowa Sole Proprietor
When it comes to being a sole proprietor in the state of Iowa, there is no formal setup process. There are also no fees involved with forming or maintaining this business type. If you want to operate an Iowa sole proprietorship, all you need to do is start working.
However, just because its so easy to get started doesnt mean there arent some additional steps you should take along the way. While these parts of the process arent strictly required, many sole proprietors find that they are in their best interests.
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What Is A Limited Liability Company
- A limited liability company is similar to a corporation, but with slight differences.
- Like a corporation, it offers limited personal liability.
- An LLC is not required to hold regular stockholder or management meetings, and there are no requirements to comply with other corporate formalities.
- Contact an attorney or an accountant to determine if this structure works for you.
What Taxes Are Associated With A Sole Proprietorship
While sole proprietors report income on their personal taxes instead of as a separate business entity, taxes can still be a big headache. Again, at the state and local levels, what you will be required to pay may vary. Generally, though, you will be responsible for:
- Federal income tax
- State income tax
- Self-employment tax
- Sales tax
Sole proprietors will also pay quarterly estimated taxes rather than just paying once a year. The estimated taxes include your income and self-employment tax. Estimated tax payments are owed if you expect to owe at least ,000 in taxes at the federal level and are due in January, April, June, and September.
Sole proprietors should also closely track their business deductions. These will help offset your income and result in lowering your tax obligation. A few common deductions include home office space, some retirement plans, health savings accounts , marketing, loan interest, bank fees, legal fees, and the internet.
There are ways to make the tax headache easier and let you focus more on the business. Employing a tax professional can help you with the guidance, preparation, and filing of your taxes.
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Choosing To Incorporate A Business
Name Your Sole Proprietorship
With a sole proprietorship, you can name your business using your name, and you can also include a description of the work you do. For example, if your name is Joe Smith and you will open a landscaping business, you can name the company Joe Smith Landscaping without registering your business name. If you would prefer to call your business Trees and Shrubs, you would need to apply for a DBA name.
To apply for your DBA, start by researching name restrictions and availability. Restrictions in most states include avoiding false associations with other businesses or institutions, not using words that describe activities illegal in that state, and avoiding words associated with regulated industries like banking.
To determine name availability, you need to conduct a search of business names. Searches can be conducted through your states Secretary of State website. Most include a searchable database. Try searching for as little of your chosen name as possible, as this will give you more results.
Once youve selected a name, you can register your DBA name. Usually, this can be done online through your local county. Fees will vary between states. Before you take this step, though, its good to determine your businesss domain name. Most companies have at least some online presence, and you dont want to register a name and then discover it isnt available as a website.
If you decide to pursue a trademark, you will need to:
- Complete and submit your online application.
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Remaining A Sole Prop
It is incredibly simple to begin your business in the form of a sole prop. In reality, you just need to begin earning money in exchange for services and funds. It is common for people to almost fall into a sole prop fully by accident. This ease and simplicity make sole proprietorships appealing for many.
Some sole prop owners also appreciate the fact that they are fully in charge. In a sole proprietorship, you are the only decision maker on things such as office space, employees, and products. You also get to use your profits in any way you want, including the payment schedule. You can choose the size of your business as well. The only requirement is that you comply with IRS regulations and submit the proper information accurately. You can even decide to stop your business at the time and in the way that you prefer. So, if you find a high-paying job, you can dissolve the business right away, or you can sell immediately.
There is not even a need to get an EIN and open a specific business bank account if you have a sole prop. Instead, you can use your own SSN. Going that route, however, does complicatetaxes somewhat.
