Starting a business can be a daunting prospect, especially for those who are just starting out or are unfamiliar with the legal processes involved. In the US, one of the most common and flexible business structures is that of a proprietorship - an unincorporated business owned and run by one individual. But, there are several things that potential proprietors in New York should consider before getting started. This article will outline the five key topics that every aspiring business owner based in New York should take into consideration when making the decision to establish a proprietorship.

The first matter of importance for potential proprietors in New York is the legal requirements. Proprietorship is a straightforward business structure and is generally less demanding on the legal front than other business models such as those with limited liability. But, there are still certain requirements that a proprietorship must meet in order to be created and to remain valid. These include registering the business with the local tax office and any other licensing requirements that may be imposed by the relevant local authorities.

The second thing to bear in mind when creating a proprietorship is personal liability. As the business is unincorporated, it does not have its own separate legal identity and the business owner is personally liable for all of the business' debts and obligations. This means that, if any creditors sue the business, the business owner will be personally responsible for repaying the creditors, as well as for any damages caused by the business. It is therefore essential for proprietors to ensure that they have sufficient insurance cover and finances to protect themselves from any financial liability arising from the business.

The third factor to consider when beginning a proprietorship is tax planning. The taxation of a proprietorship is slightly different from that of a limited liability company (LLC) or a corporation, as the income derived from the business will be subject to self-employment tax. This means that, as well as paying income tax on the earnings of the business, the proprietor may also be liable for paying self-employment taxes. As such, proprietors should speak with a tax advisor to ensure that the right tax planning steps are undertaken to minimize the tax burden on the business.

Fourthly, potential proprietors should consider the advantages and disadvantages of the business structure in comparison to other structures. As proprietorships are unincorporated, they offer the convenience of being simple and straightforward to set up and manage, with little time required for administrative and legal tasks related to the business. They also tend to impose fewer restrictions on the business owner than other structures, such as LLCs or corporations, with no minimum capital requirements and fewer restrictions on finance and transfers into the business. However, there can also be certain drawbacks, such as the potential for personal liability, the lack of an independent legal identity, and the increased tax burden associated with a proprietorship.

Finally, acquiring the necessary legal advice is crucial for any aspiring proprietor. Consulting a legal professional familiar with the particular regulations in New York is a must before setting up a proprietorship, in order to ensure all the required steps are taken in an appropriate manner. The experienced lawyers at UpCounsel have a deep understanding of local regulation and business law, providing comprehensive advice on the pros and cons of any business structure, as well as helping to complete the legal requirements of setting up a proprietorship and manage any related obligations.

Establishing a proprietorship can be a great way to begin a business venture, but it is important to consider the various legal and financial implications of such a structure in order to ensure the long-term success of the business. By following the five considerations outlined in this article, potential proprietors in New York can ensure that they have the necessary knowledge and legal advice to create a profitable and legally compliant business.



Business Structures,

Tax Planning