[ Starting a Florida business ]
LLC vs sole proprietor in Florida: which should you start with?
By REM Strategic Services · Updated
[ Quick answer ]
A sole proprietorship costs nothing to start and needs little paperwork, but your business and personal finances aren't separated. A Florida LLC costs $125 to form and $138.75 a year to keep, and in many situations it separates business debts and lawsuits from your personal assets. By default, a single-member LLC is taxed like a sole proprietorship for federal income tax. If you're signing contracts, hiring, or working with customers' property, most owners start with an LLC.
The basic difference
A sole proprietorship is you doing business. There's no separate company. You start one by starting to work.
An LLC is a separate company you form with the state. In Florida, you file Articles of Organization with the Division of Corporations on Sunbiz. The business has its own name on record, its own EIN, and in many situations its own liability.
| Sole proprietor | Single-member LLC | |
|---|---|---|
| Cost to start | $0 with the state | $125 state fee |
| Yearly state cost | None to exist | $138.75 annual report by May 1 |
| Liability | You and the business are the same | Separates business and personal liability in many situations |
| Federal income tax (default) | On your personal return | Taxed like a sole proprietorship unless it elects otherwise |
| Using a business name | Generally register a fictitious name | The LLC name is registered when you form |
| EIN | Optional in many cases; free | Free from the IRS; most owners get one |
Liability: what an LLC does and doesn't protect
The main reason people form an LLC is to keep business debts and lawsuits away from personal assets like a home or savings. In many situations, an LLC does that.
It isn't absolute. Some things can still reach you personally.
- Personal guarantees. If you sign a loan or lease personally, you're on the hook.
- Your own negligence. If you personally cause harm, the LLC may not shield you.
- Mixing money. Paying personal bills from the business account can undermine the separation.
Open a separate business bank account and keep business money in it. It's the simplest way to keep the LLC's separation meaningful.
Taxes: often the same to start
For federal income tax, a single-member LLC is a disregarded entity by default. That means it's taxed like a sole proprietorship: business income goes on your personal return.
An LLC can elect to be taxed differently. Whether that makes sense depends on your income and situation. That's a question for a CPA.
We're not a law firm or CPA. This is general information, not legal or tax advice.
When starting as a sole proprietor is fine
If you're testing an idea, doing small side work, or don't yet have customers, starting as a sole proprietor is a reasonable choice. You can form an LLC later.
If you'll use a name other than your legal name, you generally register a fictitious name in Florida.
When an LLC is usually worth it
Most owners form an LLC before they take on real risk or real customers. The $125 is small next to what's at stake.
- You're signing contracts or leases.
- You'll work in customers' homes or on their property.
- You're hiring help.
- You want a business bank account and a business name on record.
- You're building a website and want the business name and EIN settled first.
If you have multiple partners or real estate holdings, talk to a lawyer before you file. Those setups need more than a basic operating agreement.
[ Prices ]
If you decide on an LLC
- Florida LLC (filing, Florida's $125, EIN, basic operating agreement)$249
- Launch: Florida LLC + Starter website (up to 5 pages)$1,099$100 more than the site alone. Half now, half at launch.
- Florida annual report (paid to the state)$138.75 a year
[ Common questions ]
Questions owners ask
- Can I switch from sole proprietor to LLC later?
- Yes. You can form an LLC at any time. Plan to move bank accounts, contracts, and licenses into the LLC's name once it's formed.
- Does an LLC protect my house if I get sued?
- In many situations, an LLC separates business liability from your personal assets. It isn't absolute. Personal guarantees, your own negligence, and mixing business and personal money can undermine it. Ask a lawyer about your specific situation.
- Will an LLC lower my taxes?
- Not by default. A single-member LLC is taxed like a sole proprietorship for federal income tax unless it elects otherwise. Talk to a CPA about whether an election makes sense for you.
- Do I need a business name registration as a sole proprietor?
- If you use a name other than your legal name, you generally register a fictitious name in Florida.
- What does an LLC cost to keep each year in Florida?
- The annual report is $138.75, due by May 1 every year starting the year after you form. It's $538.75 if late.
[ Want it done for you ]
Start with a website that brings in calls.
Starter website for $999 — half now, half when it goes live. You own it. Starting from zero? Launch adds the Florida LLC.
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