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When establishing a new business, many owners choose to operate as a sole proprietorship due to the relatively low cost and ease of registration. While this corporate formation may be appropriate in some situations, it can expose others to significant liability issues. Here, the business law attorneys of Zangari Cohn Cuthbertson P.C. in New Haven, CT, explain the benefits and disadvantages of this popular corporate structure.

The Advantages of a Sole Proprietorship

business lawUnlike other formations, sole proprietorships are not subject to the laws and regulations with which LLCs and incorporated entities must remain compliant. You won't have to hold regular meetings, fill corporate positions, and you can legally mix your personal and business assets. Also, if you begin as a sole proprietorship, business laws in most states make it fairly easy to convert to another form when your needs or goals change.

The Disadvantages of a Sole Proprietorship

Despite these rewarding advantages, keep in mind that a sole proprietorship is not a separate legal entity. In other words, the owner will be held personally responsible for all debts, losses, and legal obligations the business incurs. The company’s revenue is also considered part of the owner's personal income, which means you won't be eligible for many business-related tax advantages. In the long run, taking advantage of the simplicity of a sole proprietorship can result in additional expenses—especially if you're named in a suit or miss out on significant tax benefits.

The skilled attorneys at Zangari Cohn Cuthbertson P.C. have been helping Connecticut entrepreneurs establish new businesses since 1946. Visit the website to learn more about their extensive range of legal services. You can reach their New Haven office by calling (203) 789-­0001 to schedule a consultation, or dial (401) 244-9048 to speak with a representative at their Warwick, RI, location.

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