Starting a business in Florida? A sole proprietorship is one of the most common business entity types, providing simplicity and ease of formation. According to data from the U.S. Small Business Administration (SBA), over 3.1 million small businesses called Florida home in 2022, of which approximately 61.9% are sole proprietorships. If you’re ready to join the nearly 2 million successful sole proprietors in the state, this guide will walk you through getting legally registered.

Related: How to start a business in Florida

What is a Sole Proprietorship?

A sole proprietorship is a business structure where a single individual owns and operates the business without a legal distinction between the business owner and the business entity. This means the owner is responsible for all debts, losses, and liabilities the business may incur. Setting up a sole proprietorship is straightforward, requiring no formal action or filing with government agencies. It automatically comes into existence when an individual initiates business activities.

Despite the ease of setup and minimal registration requirements, a sole proprietorship comes with the warning of personal liability for business debts and obligations.

Understanding the Differences Between Sole Proprietorship and an LLC

Choosing the right business structure is a critical step when starting a business. Two of the most common structures are sole proprietorships and limited liability companies (LLCs). A sole proprietorship is the simplest form of business where the owner and the business are considered the same legal entity. This implies that the small business owner has unlimited personal liability for the business’s debts and obligations, meaning the owner’s personal assets could be at risk if the business incurs debt or is sued.

On the other hand, an LLC offers limited liability protection. The owners, often called members, are not personally responsible for the company’s debts and liabilities (unless they sign a personal guarantee for a business loan). If the business owes a debt or is sued, only the assets of the business are at risk, not the personal assets of the members.

In terms of taxation, both sole proprietorships and LLCs are considered “pass-through” entities. For sole proprietorships, this means that the business itself does not pay taxes; instead, the profits or losses are passed through to the owner’s personal income tax return. Similarly, an LLC is also a pass-through entity by default, but it offers more flexibility as it can choose to be taxed as a corporation by filing a form with the IRS. In some cases, electing to be taxed like a corporation can provide tax savings.

While sole proprietorships are easier and less expensive to set up, LLCs offer personal asset protection and tax flexibility. The decision between forming a sole proprietorship or an LLC depends on the specific needs and goals of the business.

Related: How to form a Florida LLC

Pros and Cons of Sole Proprietorship

Advantages

• Ease of setup: Sole proprietorships are the simplest form of business entity to start in Florida, requiring minimal paperwork and effort.
• Cost: Setting up a sole proprietorship is the least expensive compared to other business structures. This makes it an attractive option for entrepreneurs who want to keep their initial investment low.
• Control: Being the sole decision-maker allows you to steer your business in the direction you envision without external influences.

Disadvantages

• Unlimited personal liability: One of the major downsides of a sole proprietorship is that the owner is personally liable for all business debts and obligations. This means that if your business is sued or owes a debt, your personal assets can be used to satisfy these liabilities.
• Taxes: Sole proprietors face the downside of self-employment taxes and potentially miss out on tax benefits available to the corporation and LLC.
• Limited life: The existence of a sole proprietorship is tied to the life of the business owner. If the owner passes away or becomes incapacitated, the business ceases to exist.

Steps to Register a Sole Proprietorship in Florida

While establishing a sole proprietorship in Florida doesn’t require any formal registration with the state since it is the default structure, there are a few steps you need to take to ensure your business is legally set up.

Step 1: Come Up With A Business Name

As a sole proprietor in Florida, you can operate your business under your full name or a unique business name. For instance, if your name is John Doe, you could operate as “John Doe” or “John’s Landscaping Services”.

Step 2: File The Fictitious Name Registration Form

Once you’ve decided on a business name, Florida law (Florida Statute 865.09 – Fictitious Name Act) requires that it be advertised at least once in a newspaper located within the county where your principal place of business is situated. Although proof of this advertisement isn’t required to be submitted, by signing the application form, you certify that the name has been advertised before filing the form.

After running the legal notice, the Fictitious Name registration can be filled out and either submitted online through the state’s Sunbiz website or by mailing the form to the Florida Department of State, Division of Corporations. 

The purpose of registering a fictitious name is to inform the public about the individual or business entity transacting under a particular name. It’s important to note that this registration does not reserve the name or prevent another party from registering the same name.

Related: How to file the Fictitious Name registration form

Step 3: Get an EIN

Obtaining an Employer Identification Number (EIN) from the IRS is optional for sole proprietors without employees. However, it can be useful for keeping your social security number off certain business documents. Some banks may also require an EIN before opening a business bank account.

Related: How to register for an EIN

Step 4: Research Business License Requirements

While the state of Florida does not issue a general business license, many cities have their own licensing requirements, which can vary based on the business’s location and activities.

Also, depending on your business location, you might need to adhere to specific zoning regulations, including obtaining occupancy or home occupation permits. If you plan to renovate a facility, a building permit from the local building and planning department is necessary, and some areas require a permit for adding signage.

Furthermore, if your business involves selling taxable products or services, registering for a Seller’s Permit with the Florida Department of Revenue is a must. Businesses intending to resell merchandise should consider getting a Florida Resale Certificate to avoid paying sales tax on goods to be sold to customers.

Last, various professions and industries in Florida are regulated, necessitating professional licenses, which can be obtained from the Florida Department of Business & Professional Regulation (DBPR) and the Department of Agriculture and Consumer Services (DACS).

Related: What business licenses are needed in Florida?

Sources:
Small Business Administration
Internal Revenue Service
Florida Division of Corporations
Florida Department of Business and Professional Regulation