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How to Start a Sole Proprietorship in Connecticut

Establishing a sole proprietorship in Connecticut doesn’t require filing formation documents, but there are other filings that need to be completed. Connecticut sole proprietors will want to register their business name, get required business licenses and permits and get an IRS employer ID number (EIN). In this guide we’ll cover the 5 steps sole proprietors should complete to ensure their business is set up and legally compliant.

Prospective Connecticut business owners should keep in mind that a sole proprietorship does not protect your personal assets. If you form your business as a Connecticut LLC your personal assets can be protected if you are sued. For more information on the differences, check out our LLC vs Sole Proprietorship guide.

1. Come Up with a Business Name

The first thing you’ll want to do when starting a business as a sole proprietor in Connecticut is to pick a business name. Your business name should be unique and easy to recall so that potential customers have an easier time remembering your name and that you won’t be confused for another business. It’s recommended that you try to come up with a few different names so that you have multiple options if your preferred name is already in use. If you need more inspiration, be sure to read our guide on how to come up with a business name, where we provide 15 different tips to come up with a great name.

Do a Connecticut Business Name Search

Once you have a few names for your business, it’s time to complete name search to ensure your name is unique:

2. Register Your Business Name

As a sole proprietor, there is no legal separation between you as an individual and your business. As a result if you plan to operate under a business name other than your own personal name, you’ll need to file a DBA to register your Connecticut business name. DBA stands for “doing business as” and is a way for a business to operate under a name different than their legal name. In Connecticut you may also hear a DBA referred to as a “Trade Name”.

DBA’s for sole proprietors in Connecticut are filed at the city level. To complete the registration of your Connecticut DBA, file a Trade Name application with the city clerk's office. The DBA (Trade Name) filing fee for sole proprietors is $5-10 (varies city to city).

3. Obtain Business Licenses and Permits

Sole proprietorships are subject to business and professional licensing requirements. Business and professional licenses are issued at the federal, state, and local levels. The types of licenses and permits your business is required to file will vary widely depending upon the nature of your business and how it operates.

Federal Licenses and Permits

Most common types of businesses are not subject to federal licensing, however if manufacture or sell products that are regulated at the federal level you will need the relevant federal license before you begin operating. Below is a list of federal agencies from the U.S. Small Business Administration (SBA) that issue federal permits and licenses :

Connecticut State Business Licenses and Permit Resources:

For information on state-level licenses and permits in Connecticut visit the CT’s Business Response Center website.

Local Licenses and Permits

Local licenses and permits vary widely depending on where your business operates and the nature of the business, however the most common types of local licenses and permits include:

  • Operating License
  • Building Permits
  • Zoning and Land Use Permits
  • Health Licenses and Perits
  • Signage Licenses

Professional Licenses

If you work in a regulated profession you may also require a profressional license. These licenses are required to show proof that you have completed the required training or possess the required expertise to work in the field. There are a wide variety of industries where a professional license is required but some of the most common are:

  • Accountants
  • Electrictians
  • Financial Advisors
  • Hair Stylists & Barbers
  • Insurance Agents
  • Mechanics
  • Medical Professionals
  • Plumbers
  • Real Estate Agents

With how complex and time consuming the business license research process can be, we recommend using a service to determine which licenses you’ll need to apply for.

4. Get an EIN from the IRS

If you have employees, you are required to get an EIN. EINs are a nine-digit ID number issued by the IRS to identify businesses for tax purposes. You can apply for an EIN for free online using the IRS’ EIN Assistant.

If you don’t have employees, you are not required to get an EIN as a sole proprietor. However, it can be useful to get an EIN. They are often required to open a business bank account and can be used in place of your social security number for most business applications.

Important Note about Sole Proprietor EINs:

Since sole proprietorships are not viewed as separate from an individual, sole proprietor EINs are issued under their names, not their DBA names. As a result, you will only be issued 1 EIN as a sole proprietor for your lifetime. This will be used for any and all businesses you will operate as a sole proprietor. If you apply for an EIN as a sole proprietor and receive reference error 101, this likely means that you have already been issued an EIN previously. If you cannot recall your EIN or have not been issued an EIN previously, you will need to call the IRS Business and Specialty Tax Assistance line at 1-800-829-4933 and use the prompts related to reference number 101.

5. Open a Business Bank Account

The final step to making your California sole proprietorship a reality is to open a business bank account. It’s important to keep your business and personal transactions separate to prevent the co-mingling of funds. The easiest way to do this is to open a designated business bank account and use it only for business transactions. This will make it easier for you to complete your accounting and bookkeeping tasks.

Check out this helpful guide to learn how to opening a business bank account.

Other Items to Consider

Once you have established your sole proprietorship, you will also want to complete these important tasks:

  • Setup Credit Card Processing:
    Considering that over 60% of transactions are done via debit and credit cards, it’s essentially a requirement to accept credit card payments. We go over how to do this in our How to Accept Credit Card Payments guide.

  • Establish an Accounting System:
    You’ll need to determine the accounting method you will use for your business: cash basis accounting vs. accrual accounting. To learn more, check out our guide on small business accounting 101.

  • Get Business Insurance Coverage:
    As a sole proprietor, you lack personal liability protection, so getting adequate business insurance could be your only financial protection method. Learn more about business insurance here.