Choosing the appropriate business structure is an important decision, with many finding themselves choosing between LLCs and sole proprietorships in Florida. Sole props are essentially businesses that one person runs and does not have any business entity of a formal nature. In many cases, sole props come about from hobbies or other interests.
While many companies start as sole proprietorships, they should not necessarily stay this way. Forming a Florida LLC can provide you with multiple benefits, but you should still be aware of why you might want to remain 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 complicate taxes somewhat.
While a sole proprietorship is a good option for some, incorporating your business to form your LLC will come with its own set of benefits. In many cases, these benefits will outweigh the minimal hassle and costs associated with the formation.
One of the biggest benefits comes from record keeping. LLCs tend to hire someone to take care of financial and business records, whether an internal employee or via outsourcing. This recording of paychecks for you and employees assists with taxes when it comes time to file. The level of record keeping that LLCs follow means that everything from expense records to income is easy to find, making taxes much easier.
Furthermore, you will likely have a CPA take care of your Florida business taxes, including forms. That will improve your accountability so you can rest easy knowing your records and taxes are accurate without having to spend time taking care of it yourself. This way, you can focus on your work.
While there are more requirements for conducting business as an LLC than a sole prop, they are still fairly minimal. You will just need to actually form the LLC and get your EIN. In Florida, most industries will not require you to get any business license.
Incorporating as an LLC will also provide you with a range of legal benefits, particularly in relation to lawsuits. The biggest of these is that if there is a lawsuit filed against the LLC, it cannot impact personal assets. This would not be the case with a sole prop as personal and business assets in that structure are not separated. This protection of personal assets alone is enough to make many business owners choose an LLC.
There are even LLC benefits linked to your reputation. Simply put, the fact that you have formed an official business entity will improve your image among potential partners, other businesses, and clients.