By Tony N. Woolard, Connecticut attorney and founder of Harborage Law, PLLC. Updated October 2026.
If you are starting a business in Connecticut, one of the first questions is whether to stay a sole proprietor or form a limited liability company (LLC). Here is how the two compare under Connecticut law and federal tax rules.
Short answer
The Connecticut business portal explains that sole proprietorships are not required to file forms and pay fees to establish their businesses in Connecticut, but it also notes that if someone sues you or your business for property or personal damage, you are liable from your own assets. An LLC costs $120 to form and $80 a year for the annual report (state fees as of October 2026), and its members are not personally liable for the LLC's debts solely because they are members (Conn. Gen. Stat. Section 34-251a). For federal income tax, a single-member LLC is disregarded as separate from its owner by default.
Sole proprietor vs. LLC at a glance
Sole proprietor
Formation: no state forms or fees required to establish the business
Business name: trade name certificate from the town clerk if you use a name other than your own
Liability: the state portal notes you are liable from your own assets
Connecticut LLC
Formation: Certificate of Organization ($120 as of October 2026)
Annual report: $80, filed January 1 to March 31
Liability: members are not liable solely by reason of being members (Section 34-251a)
Default federal tax treatment: single-member LLCs are disregarded entities; LLCs with at least two members are partnerships
Using a business name as a sole proprietor
Connecticut does not allow anyone to transact business under an assumed or fictitious name, other than their real name, unless a trade name certificate has been issued (Conn. Gen. Stat. Section 35-1a). The application is filed with the town clerk in the town where the business is principally transacted. Certificates issued on or after January 1, 2025 are valid for five years, and certificates issued before that date expire on December 31, 2029 unless renewed.
Liability protection with an LLC
Under Connecticut law, a debt, obligation, or other liability of an LLC is solely the liability of the company, and a member or manager is not personally liable for it solely by reason of being or acting as a member or manager (Section 34-251a). The same statute provides that failing to observe formalities in managing the company is not, by itself, a ground for imposing that liability on a member or manager.
Taxes
By default, the IRS treats a single-member LLC as disregarded as separate from its owner for income tax purposes, and a domestic LLC with at least two members as a partnership. An LLC can elect to be treated as a corporation by filing IRS Form 8832. Because the best choice depends on your income and goals, it is wise to review tax elections with a CPA.
Frequently asked questions
Is an LLC better than a sole proprietorship in Connecticut?
It depends on your goals. An LLC adds a $120 formation fee and an $80 annual report (as of October 2026) but separates the company's liabilities from its members under Section 34-251a.
Do I need a trade name certificate as a sole proprietor?
Yes, if you do business under any name other than your own real name. It is filed with the town clerk in the town where the business is principally transacted.
Can I convert my sole proprietorship to an LLC later?
Yes. You can form an LLC at any time by filing a Certificate of Organization. Our guide on how to start an LLC in Connecticut walks through each step.
Need help choosing?
Harborage Law helps Connecticut business owners choose and form the right entity, with flat fees quoted in writing before any work begins. Government filing fees and other third-party costs are separate, are your responsibility, and are passed through at cost. Harborage Law does not handle court or litigation matters, so your matter will not involve court costs or litigation expenses. You can learn about our business formation services or book a free consultation.
This article is general information, not legal advice, and reading it does not create an attorney-client relationship.
