Many self-employed Connecticut residents are eager to start their businesses. The simplest and most rational solution to this issue is to join the ranks of sole proprietors.

Organizing and managing a business in this format is the least difficult in America and has no service pitfalls. Although, future business owners will have to adhere to certain norms. Also, be prepared that you will have to face some restrictions regarding the functions of your sole proprietorship. 

So, the main task of this manual is to help you answer the essential question – is the business format of an individual enterprise right for you? And, of course, we will tell you which aspects to pay attention to while opening a sole proprietorship and how to set up a business structure in this vein properly.

It is vital: business owners should be aware that a sole proprietorship is not a guarantor of the safety of personal assets. But with LLC, on the contrary – the assets will be safe. LLC is easy to organize by doing forming it yourself or hiring a cheap LLC service.

The Proper Way To Start Business As The Connecticut Sole Proprietor

There is no algorithm for organizing the business work of an individual entrepreneur in Connecticut as for LLC. In addition, the state does not charge additional service fees for the formation or management of this type of business or company. Are you looking to become an individual business owner and start a sole proprietorship in Connecticut? – Just start working!

Though, you still have to go through several additional legal formalities. These service stages are optional. Although many sole proprietors prefer not to neglect them, compliance with these formalities guarantees the legal protection of their interests.

Applying For DBAs

Almost every company and business owner prefers doing business as a DBA. There are many benefits to running a business under an assumed name compared with an entity or LLC. We are talking primarily about creating the business image of your company. Potential clients and consumers will find this approach more professional and give you more confidence. It turns out that a company that uses the real name of its owner is often not competitive.

Let’s clarify that a company owned by sole proprietors can use the DBA to open and manage a business bank account. Customers will appreciate it as one more advantage in favor of the business owner, so they feel more comfortable.

To start working as a sole entrepreneur in the state of Connecticut, you need to choose an assumed name. But this name must be available – this is the only way you can register your DBA. After checking that, make an application for the name and submit this Certificate to the clerk, who is located in the same place as your company.

If you are starting a business in several cities, go through the DBA registration procedure everywhere. To make this process faster and easier, here you will find the current template of this form for Hartford. Also, if you do not know how to determine the location of clerks, use the updated directory here.

You can find out all the details about registering an administrator in Connecticut from our expert guide.

Clarification & Compliance with Tax Requirements

You can run your business in this format and not hire third-party employees. In this case, you do not need to obtain an EIN (Federal Tax Identification Number) because your Social Security number will replace it. Of course, it would be correct to take care of your confidentiality and still use the EIN and not the SSN.

The nature and the structure of the business activity of individual entrepreneurship determine the list of tax requirements that the state will put forward (as with LLC).

Depending on the type of business activity, the amount of tax is different in Connecticut. So, if you sell goods, for example, furniture, one form of tax fees will be established for you. If you work in the field of hotel business or medicine, the tax will be different. These can be a use tax, a sales tax, and so on.

You will find out about all this if you register with the Taxpayer Service Center Department in Connecticut. Entrepreneurs from any business sector can determine the tax fee they need to pay using that convenient online tool.

Business Licenses & Permits

You do not need a general license to conduct any business in Connecticut. Individual entrepreneurs of all categories are exempt from the need to receive this document. But, depending on the area of your enterprise, you still need to have other types of licenses and/or permits on hand. They must meet the current requirements of the Connecticut State.

Entrepreneurs in Connecticut receive different types of permits. You need to know which type of license applies specifically to your business field. Do you want to know which license you exactly need? Then use the services of the Connecticut Center for Economic Resources license search.

Also, in any city and county of Connecticut, there is a procedure for issuing local licenses. Always keep in mind that. For example, in large cities such as Bridgeport, New Haven, Stamford, Hartford, and Waterbury, entrepreneurs receive local permits. And such requirements apply to all the Connecticut municipalities.

Connecticut Sole Proprietor: The Notion & Essence

A sole proprietor is not a legal entity! But any corporation and limited liability company (LLC) has this status. As a sole proprietor, you run the business alone (register and manage it on your behalf). It is worth noting that this gives the business owner advantages, though, imposes additional obligations and responsibilities on him.

Make Sure to Pay Attention to the Following Three Aspects

There are obligations to pay taxes to the state

A business owner and an individual entrepreneur are the same people. It means that filing tax returns is not a requirement, as with an entity or LLC. You need to declare your income and expenses and fill out the declaration of an individual;

Signing contracts

Business owners who are registered as sole proprietors have the right to enter into contracts on their behalf, unlike an entity. Also, receiving profit from clients, in checks they can indicate their name in the recipient column;

Flexible terms of business management

The advantage difference between individual entrepreneurship and any entity is the ability to combine work and personal assets. Whereas corporations and LLCs must separate personal assets from company assets. It has several positive and negative aspects. For example, if you have financial difficulties, creditors can seize or confiscate your personal property (house, car, etc.). In the case of corporations and LLCs (or any entity), creditors do not have this freedom, as their powers only apply to business assets.

Final Thoughts

Of course, the structure of doing legal business as a sole proprietor is greatly simplified while in Connecticut. You don’t even have to pay any commission fees provided for the entity or LLC. At the same time, based on the nature and structure of the business activity that you conduct, you will all have to go through a series of entity stages.

The issues of taxation, obtaining licenses, and permits require more detailed consideration. Also, pay attention to the possibility of obtaining and using DBA. These aspects are vital, as their omission can result in unnecessary legal penalties for you.

We have prepared this manual so that you can think over the structure of your business to the smallest detail. Manage it correctly and get more legal profit!