Starting a new business in the Empire State requires a deep understanding of the laws and regulations that govern proprietorship in New York. Every person who plans to operate a business in the state as a sole proprietor should understand the details surrounding any prospective business before launching it into the market. UpCounsel outlines frequently asked questions and answers regarding proprietorship in New York that entrepreneurs should know.

What Is a Proprietorship?

A proprietorship is a business owned and operated solely by one person, who also assumes all of the responsibility and financial obligations associated with the business. In essence, a proprietorship is an unincorporated business, and the individual ultimately owns and controls the entire company.

What Are the Benefits of Proprietorship?

Proprietorships are attractive to some business owners because of their simple structure. Many people opt for this designation because there is no need to put the business through the more complicated process of forming a limited liability company (LLC) or a corporation. In fact, establishing a proprietorship usually requires no specific paperwork to be filled out.

The most important benefit of running a business as a proprietorship is that the individual is in full control of the business operations and can keep all the profits from the business as a personal income. Furthermore, he or she will not have to have any other partners to help with decision-making or resource sharing.

What Are the Disadvantages of Proprietorship?

As beneficial as a proprietorship may be, it is very important to understand the potential risks associated with it. Since the owner is not protecting the business by forming an LLC or corporation, the entire proprietorship’s assets are liable for any debts or lawsuits that are brought against it. Thus, the owner may personally be bound to large financial obligations in the event of a lawsuit.

Additionally, proprietorships come with fewer benefits than more complex business entities. For example, operators of a proprietorship do not have the option to offer stock options or other equity options for the purpose of raising capital.

Can I Operate a Proprietorship in New York?

Yes. Proprietorships are conducted in the same manner across the United States, so anyone who would like to open a proprietorship in New York is eligible to do so.

Are There Any Tax Implications for Proprietorship Operators in New York?

Proprietorships in New York are subject to the same taxes as any other business in the state. Thus, the operator will need to pay any applicable taxes for both state and federal income, sales, and payroll.

What Types of Legal Requirements Must Be Met To Operate a Proprietorship in New York?

Operating a proprietorship in New York is a fairly straightforward process. Most likely, all that is needed is to register the assumed business name with the New York Department of State, Division of Corporations if this name is different from the owner's actual name.

Unless operating a certain type of profession, such as a lawyer or doctor, or operating a restaurant, proprietors in New York are not typically required to obtain a separate business license. It is recommended to research any requirements in advance that may be specific to the type of business that is being undertaken in the state.

Concluding perspectives

A proprietorship is a great business entity for someone who wants to own and operate a business on his or her own. Despite the relatively simple requirements to form one in New York, proprietors need to understand the potential risks associated with the business entity in addition to any necessary license obligations.

For further information and assistance in setting up a proprietorship in New York, consider seeking the help of a qualified business attorney who specializes in proprietorship and who has experience within the state. Business owners who are wary of resultantly potential liabilities should opt for forming a corporation or an LLC to obtain the necessary protection for their business and personal assets.



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