Wednesday, September 14, 2022

How To Start Sole Proprietorship In Florida

Local Business Licenses In Florida

Set up a Sole Proprietorship in Florida

You might think youre in the clear if your industry doesnt require a statewide license or permit. Think again. Theres a strong chance youll need to get a local business license.

Almost all Florida counties require businesses to obtain a business tax receipt before doing business in the county. This requirement applies to all businesses, including one-person, home-based operations. Many cities require a business tax receipt in addition to the county license. In order to receive a business tax receipt you must check with the county tax collector to see if you need a license and then register your business with the Florida Department of Revenue.

More on that below.

Open A Bank Account For Your Sole Proprietorship

Even with a new business, it is advisable to maintain business finances separate from any personal bank account. This makes accounting and tax filing much easier. When opening a bank account for your business, the bank likely requires either your Social Security number or EIN as well as a copy of your business name filing.

Registering a sole proprietorship in the State of Florida is a simple, straightforward process. First, select an available business name. Second, register your business name with the State of Florida. Third, obtain any licenses required to operate your business. Fourth, comply with any other tax or regulatory requirements. Finally, open a bank account for your sole proprietorship. Following these steps will ensure that your business operates smoothly from day one.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.

Ready to incorporate your business?

Here Are The Three Main Things You Need To Know:

Tax Responsibilities

Because theres no distinction between the owner and the business itself, sole proprietors dont need to file business tax returns they instead simply claim any business profits or losses on their personal tax returns.

Contracts

Sole proprietors are allowed to sign contracts using their personal name, and along those same lines, customers can write checks to the business by using the sole proprietors name.

More Flexible

The other big difference between sole proprietorships and more formal business structures is the fact that sole proprietors are allowed to commingle business and personal assets as much as they want to. With LLCs and corporations, ownership is required to keep their assets separate from those of the company. The downside of this aspect for sole proprietors is that if your business is sued, creditors are free to pursue your personal assets like your house, car, personal bank accounts, etc. For corporations and LLCs, creditors are limited to your business assets.

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Register A Business Name

After deciding on the business entity, the next step in starting a business in Florida is to register the business name.

Registering a Florida Fictitious Name for Sole Proprietorships

If you are a sole proprietorship in Florida and doing business under your full first and last name, John Smith, for example, there is no filing, but if the business will operate under a Fictitious Name like John Smiths Handyman Service, Mr. Handyman, etc., you will need to register the business name by filing a Fictitious Name Registration with the State of Florida.

The fee is $50 to register a Fictitious Name.

Related: How to register a Fictitious Name in Florida

Registering a Florida Business Name for a General Partnership, Corporation, or LLC

General Partnerships, Corporations, and LLCs have to pick a name when filing for the entity and have to be uniquely named. Registering the entity name will not provide much protection from anyone else from using the name, other than being able to register with the Secretary of State.

Advantages And Disadvantages Of Sole Proprietorships

How to Open a Sole Proprietorship Business in Florida ...

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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How To Start A Business In Florida

Florida is arguable the best state in the country to start a business. In 2020, Florida had the highest number of new business formations, with 994,133 business starting, according to the US Census Bureau. This was an increase of 26.88% compared to 2019. The strong business formation numbers combined with low unemployment insurance costs and a growing population make Florida a great place to start a business.

12 Steps to Starting a Business in Florida:

New Business Formation Per Capita Rank 4
New Businesses Formed Per 1,000 Population 2020 46.29
Business Formation Statistics generated using data from US Census Bureau
Cost of Doing Business in Florida
LLC Formation Cost

Obtain Business Licenses And Permits

Depending on your businesss nature, you may need to get a business license or professional license. A full list of the required licenses and permits for Florida businesses can be found here. You will also need to ensure that your business is not subject to federal licensing. Visit the sba.gov business license page for a full list.

Outside of state-level licenses and permits, city and county regulators also issue licenses and permits. Common types of licenses and permits issued at the local level include building and occupational permits, signage permits, zoning clearances, and safety and health-related permits.

The business licensing process can be quite complex depending on your business, so you may want to opt for a business license research package. These services are conducted by business licensing and permitting experts who will provide you with an exhaustive list of the business licenses and permits your specific business will need.

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To Establish A Sole Proprietorship In Florida Here’s Everything You Need To Know

In Florida, you can establish a sole proprietorship without filing any legal documents with the Florida Department of State. There are four simple steps you should take:

  • Choose a business name.
  • File a trade name with the Department of State.
  • Obtain licenses, permits, and zoning clearance.
  • Obtain an Employer Identification Number.
  • 50-State Guide to Establishing a Sole Proprietorship

    You Have Personal Liability For Debts And Obligations

    How to be a Sole Proprietorship

    One of the biggest reasons people choose to form LLCs and corporations is the limited liability they provide. Because the law views LLCs and corporations as separate entities from their owners, those businesses can take on debts by themselves.

    With a sole proprietorship, Florida business owners subject themselves to personal liability for any debts or obligations incurred by the business. This is true even if you operate under a fictitious name.

    As your business grows, this can pose a significant risk your assets and personal finances are exposed and may be taken to pay off debts or judgments incurred by you, your business, or your employees.

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    Llc Vs Sole Proprietorship: Taxes

    A single-member LLC and a sole proprietorship resemble each other in terms of tax treatment. Both are pass-through entities, which means that the business itself doesnt pay income taxes. The owner reports business income on a Schedule C thats attached to their personal tax return, and the income gets taxed at the owners personal income tax rate.

    Multi-member LLCs are also pass-through entities, with each owner reporting and paying taxes on their share of the businesss income. The only difference is that a multi-member LLC must file a business tax return with the IRS, Form 1065, U.S. Return of Partnership Income. In addition, each member must attach a Schedule K-1 to their personal tax return, which shows their share of the businesss income.

    In addition to income taxes, both LLCs and sole proprietorships might have additional tax responsibilities. No matter which business structure you adopt, youll need to pay payroll taxes if you have employees. Youll also need to collect state and local sales taxes if you sell taxable goods or services. And finally, as a self-employed business owner, youre responsible for paying self-employment taxes to the IRS. These taxes cover your social security and Medicare tax obligations.

    A few states and local jurisdictions levy additional taxes on LLCs. Depending on the state, this might be called a franchise tax, LLC tax, or business tax. Youll also have to pay state and local income taxes and payroll taxes.

    S To Starting A Sole Proprietorship Business In Florida

    In Florida, you can establish a sole proprietorship in a few simple steps. Note that you can open this business model without filing any legal documents with the Florida Department of State. The steps you need to follow to establish this business model include:

  • Table of Content

  • Choose a Business Name

    Choosing a business name is one of the first things to do if you are thinking of registering a sole proprietorship in Florida. In this city, a sole proprietor may use his or her own given name or may use an assumed name or trade name.

    It is always a good idea to choose a name that is not too similar to another registered business because of common and federal law trademark protections. You have to make sure that your chosen business name is available, and to do that, you have to run a search in the following government databases:

    • Florida Department of State
    • U.S. Patent & Trademark Office
  • File a Trade Name

  • If you use a business name that is different from your legal name, Florida requires you to register the trade name. But before you do that, you have to make sure that the name is not similar to any other business name. If the name is similar, you can face trademark infringement issues.

  • Obtain Licenses, Permits, and Zoning Clearance

  • Federal licenses and permits are required for the following business activities:

  • Obtain an Employer Identification Number

  • Submit a new hire report, if applicable

  • Find a domain name

  • Open a business bank account

  • Obtain General Liability Insurance

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    Starting A Business In Florida Doing Business In Florida

    Whether you are starting a new business in Florida, moving an existing business to Florida from another state, or already operating a business in Florida, you will need to be aware of the various registration and licensing requirements which are applicable to your business. This includes registering with the appropriate state regulatory authorities, contacting the Florida Department of Revenue to obtain the required tax information, and applying for occupational licenses. The Florida Business Guide, published by State of Florida.com, provides a detailed list of Florida business requirements, along with step-by-step instructions for correctly registering your business.

    Registering Your Business Name

    How to Open a Sole Proprietorship Business in Florida ...

    Registering your business name is an important step. It allows you to do business using something other than your legal name. Most banks require proof of registration to open an account. A fictitious name is different from your personal name. It is also different from your business’s legal name. This also applies if you are part of a partnership.

    The Fictitious Name Act requires any person to register their fictitious name or DBA name with the Florida Department of State prior to conducting business. To do so:

    • Select “Sunbiz E-file Account” under payment options.
    • Once you are notified that you have an account, you can register your fictitious name online by returning to the Florida Department of State website, clicking on Corporations, then on “Electronic Filing,” then “Fictitious Name Registration.”
    • At the bottom of the page, click on Add Fictitious Name Registration. You can pay using a credit card, check, or money order. All payments must be in U.S. currency drawn from a U.S. bank, and you should receive confirmation of your registration within 24 hours.

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    These 10 Steps Can Help You Start Your Florida Business

    There are many good reasons to start a business in Florida. The states government keeps regulatory requirements and business taxes low. There are no personal income, capital gains or death taxes. The states higher education institutions work closely with the business community to build programs that assist Floridas industries. While Florida is a great place to start a business, the process can be tricky and time consuming, so weve put together a list of the 10 of the most common steps for new businesses in Florida. While these are the most common steps to take, if you are considering opening a new business, you should consult your legal and financial advisors to guide you through the process.

    Register For An Internal Revenue Service Employer Identification Number

    An EIN or Employer Identification Number serves the same purpose to a business as a Social Security number serves to an individual. With an EIN, youll be able to open a business bank account, establish business credit, hire employees more easily, and apply for business licenses. You can obtain an EIN through filing a Form SS-4 with the IRS. Youll only need an EIN in the following circumstances:

    • You filed as a corporation or partnership
    • Your business has employees
    • Your business is involved with a trust, estate, non-profit or farmers co-op

    If you are establishing an LLC in Florida and none of the above apply to you, you are not required to register for an EIN. However, most banks will require one for a business savings account, loan, business line of credit or other business accounts.

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    When Should A Sole Proprietorship Become An Llc

    It is time to go from a sole proprietorship to an LLC when you are serious about growing your business and earning a profit.

    Sole proprietorships are only good for very low-profit/low-risk businesses.

    Example: A sole proprietorship is a good way to start out if you are doing business on a small scale or want to try out a low-risk venture to see how successful it will be.

    Forming an LLC allows business owners to grow their businesses and take on risk. This is because LLCs provide personal liability protection.

    What is personal liability protection? When a business owner has personal liability protection, they cant be held personally responsible if the business suffers a loss. This means personal assets are protected.

    Register A Partnership In Florida

    How to legally start your business in 11 steps | Sole Proprietorship vs LLC vs DBA

    If you start as a general partnership in Florida, you dont need to file any official documents to start your business. While not legally required, its best practice to create a partnership agreement document. A partnership agreement helps establish the rules for how decision-making will work, which can help if disputes arise between partners. If the partnership does business under a name that does not include the partners last names, a Fictitious Name filing will need to be completed.

    For a more information, see How to Start a Partnership in Florida for a step-by-step guide to starting a general partnership in Florida.

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    Register The Business Name

    The Fictitious Name Act requires any person or business entity to register a fictitious name, also known as a doing business as name, with the Florida DOS prior to conducting business in the state. If you have filed as a sole proprietorship, and your business has a name other than your own, you must register this as a fictitious name. If you have formed a corporation, LLC or other separate legal entity, and the business name is not the same as what you registered, youll need to file a fictitious name. Visit the Florida DOS website to learn more about specific requirements and exemptions from this step of the process

    Llc Vs Sole Proprietorship: Legal Protection

    In a sole proprietorship, theres no legal separation between the business and the owner. The owner is personally responsible for the businesss debts. If the business goes bankrupt, the sole proprietor has to file for personal bankruptcy, and both personal and business debts will be included in the bankruptcy proceedings. In addition, someone who sues a sole proprietorship can name the owner personally in the lawsuit and come after their personal assets.

    One of the best ways to protect your personal assets is to form an LLC. Since an LLC is a legally separate entity from the owner, the owner isnt personally liable for the businesss obligations. If the business fails, the owners can file for business bankruptcy, and they dont have to pay business creditors out of their own pockets. And with some exceptions, someone who sues an LLC cant personally sue the owners. Of course, owners in an LLC can be held personally liable for fraud, negligence, or personally guaranteed debts. Theres no business structure that offers absolute protection for owners for liabilities connected to the business.

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