How to Start an LLC in Connecticut? (In-Depth Guide)
Starting an LLC in Connecticut is a relatively simple process that can offer your business some significant benefits. There is a systematic procedure set by the state that you should comply with.
Since I’ve been in the LLC formation industry for several years, I’ll walk you through the steps necessary to form an LLC in Connecticut.
To provide you with all pertinent information, I collaborated with seasoned limited liability company consultants and legal advisors in the state.
- To start an LLC in Connecticut, you should register an available business name, submit all required documents and comply with state laws.
- A Connecticut LLC offers limited liability, pass-through taxation and flexible management options.
- An LLC is taxed depending on your chosen tax classification
Starting an LLC in Connecticut
In order to start an LLC in Connecticut, a business owner has to take a few steps that will have the LLC legally recognized as a business entity.
Step 1: Choose a Name for Your Business
A Connecticut LLC must have a unique business name that is not already in use by another business entity in the state.
The name must comply with Connecticut's naming guidelines, which includes the following:
- The naming guidelines are relatively simple. The name must be different from the names of other business entities, and it cannot contain certain prohibited words such as "bank," "insurance," or "trust."
- There has to be an abbreviation that includes the words "limited liability company" or the abbreviation "LLC".
- Terms you can never include in a Connecticut LLC name include terms associated with a government agency, such as "Internal Revenue Service" or "Federal Bureau of Investigation."
When you're choosing a name, it's essential to make sure that the domain is available as well.
You can use a domain search tool to check availability.
You can perform a business entity search to make sure that your desired name is not already in use by visiting the Connecticut Secretary of State's business name database.
If your business name is available, you can file an Application for a Reservation of Name with the Connecticut Secretary of State by paying a $60 filing fee.
Your limited liability company name will be reserved for the next 120 days by completing this process.
Read More: How to Look Up an LLC in Connecticut
Step 2: File Certificate of Organization With the Secretary of State
Once you have determined that a limited liability company is the right business structure for you and your desired name is available, it's time to file your Connecticut LLC Certificate of Organization with the Secretary of State .
This document officially creates your LLC and includes information such as its name, registered agent, and principal place of business.
A filing fee of $120 can be paid online with a credit card or check. For additional details on the cost of forming an LLC in Connecticut, see our guide.
The certificate can be filed online or by mail to the Business Service Division, Connecticut Secretary of the State.
Step 3: Appoint a Connecticut Registered Agent
A registered agent service is an organization that is appointed by the LLC to receive service of process on its behalf.
This means that the registered agent will be responsible for forwarding any legal documents to the company.
There are a few things to keep in mind when appointing a registered agent:
- The registered agent must be a resident of Connecticut or an organization authorized to do business in the state.
- The registered agent must have a street address in Connecticut where they can receive mail and legal documents.
- The registered agent should have a reputation for professionalism and be responsive to inquiries.
If you choose to use a registered agent service in Connecticut, be sure to do your research and compare prices before selecting one. You can find a list of registered agent services on the Connecticut Secretary of State's website.
Step 4: Draft and File an LLC Operating Agreement
Operating agreements are internal LLC documents that govern the company's operations.
An operating agreement includes things like members' percentage interests, voting rights, and management procedures.
Although not required in Connecticut, it's a good idea to have an operating agreement in place. With an operating agreement, the LLC can avoid any disputes among members.
Connecticut LLC operating agreements must include the following:
- Name of the LLC and its principal place of business
- The purpose of the LLC
- The names and addresses of all members, managers, and officers
- How profits and losses will be allocated among members
- Procedures for amending the agreement or dissolving the company
You can find a template for a Connecticut LLC operating agreement online or through an attorney. Be sure to customize it to fit your company's specific needs.
Step 5: Get a Tax ID Number (EIN)
Federal tax identification number (employer identification number or federal employer identification number) is used by the Internal Revenue Service to identify taxpayers.
You will need an EIN in order to get started, so be sure to apply for one as soon as you finish with your operating agreement. You can apply for a tax ID number online at the IRS website.
Your EIN will be mailed to you, and it will also be included in your LLC formation documents.
Once you have your EIN, you can open a bank account for your LLC and hire employees. This will make it easier to track your business expenses and income, making filing LLC taxes in Connecticut much simpler.
Step 6: Register With the Connecticut Department of Revenue Services
The Connecticut Department of Revenue Services handles the taxation of businesses in Connecticut.
Once you have formed your Connecticut LLC, you will need to register and file an annual tax return.
The amount of taxes you owe will depend on your LLC's income and deductions. Be sure to speak with an accountant or tax specialist to understand your business's specific tax obligations better.
Step 7: Open a Business Bank Account
Connecticut LLCs offer personal asset protection. However, if you don't keep your business and personal assets separate, you risk piercing the corporate veil.
For this reason, it is essential that you open an LLC bank account that will not be used for any personal expenses. This will help to clearly delineate your business and personal finances and make it easier to track your company's financial progress.
To open an LLC bank account:
- Contact the bank of your choice and schedule an appointment with a business banker.
- Bring your operating agreement and the Certificate of Formation
- Complete the necessary paperwork and provide your company's EIN
- Set up a system for tracking expenses and profits.
There are many banks that offer business checking accounts specifically for LLCs. Be sure to research the best option for you and compare interest rates, fees, and other features.
You may also want to consider a credit union, which often offers lower rates and fees than traditional banks.
Step 8: Get Necessary Licenses and Permits
Business licenses and permits are necessary in order to operate your business. The types of licenses and permits you need will vary depending on the type of business you are starting.
In Connecticut, you can find a list of all required licenses and permits on the Department of Consumer Protection's website.
The Department of Consumer Protection offers a number of resources to help business owners understand and comply with licensing requirements, including an overview of the licensing process, frequently asked questions, and contact information for each bureau within the department.
You can also contact the local town hall or economic development office for assistance.
Some common licenses and permits for businesses in Connecticut include:
- General business license
- Tax registration certificate
- Seller's Permit
- Foodservice permit
- Contractor license
- Home improvement contractor license.
A professional limited liability company in Connecticut will likely need more business licenses than a traditional LLC because it will provide professional service.
For example, a professional LLC might need a business license to practice law, medicine, or accounting.
Connecticut LLC Tax Requirements
When you start an LLC in Connecticut, the tax structure of your business will determine how you report taxes.
An LLC is treated as a sole proprietorship for tax purposes, provided that it only has one member. On the other hand, LLC members with more than two or more members are taxed like partnerships.
Both entities can still choose corporate taxation (either S corporation or C corporation) if they meet the requirements.
LLCs in Connecticut have to collect sales tax if they are selling products or services in the state.
The tax rate is currently at six and a half percent, but it might change in the future. Income tax is also collected on LLCs, and it's computed similarly to how partnership income tax works.
Connecticut business entity tax is a tax on the privilege of doing business in the state.
The tax is imposed on all LLCs but varies depending on the LLC's income. The tax ranges from $250 to $25,000, depending on how much money the LLC makes.
There are also a number of local taxes that businesses in Connecticut have to pay.
These vary by municipality, so it's important to check with your town or city hall for more information. Generally, these taxes include property tax, income tax, and sales tax.
If your limited liability company has employees, you'll need to pay employer taxes, unemployment insurance, workers' compensation, and disability insurance.
The amount that you'll have to pay for these depends on the number of employees and the type of coverage you choose.
As a business owner in Connecticut, it's important to stay up-to-date on all the latest tax laws. Make sure to consult a tax professional for legal or tax advice.
What is a Connecticut LLC?
A Connecticut LLC is a limited liability company formed under Connecticut law. It is a business entity that provides personal liability protection to its owners (called members).
This business structure is popular because it is relatively easy to set up and offers a lot of flexibility.
What Are the Benefits of Connecticut LLCs?
The benefits of Connecticut LLCs include the following:
- Limited liability for the company's owners
- Tax advantages, such as pass-through taxation
- The ability to conduct business in any state
- Reduced filing fees compared to other entities
- Ease of formation and maintenance.
One of the biggest perks is that since 2020, business owners no longer have to pay biennial business entity tax.
he state of Connecticut also offers a number of other tax advantages for LLCs, such as the ability to pass-through income and losses to the company's owners.
This can be helpful in reducing the amount of taxes that business owners have to pay on their businesses' profits.
Compared to other states, LLC formation in Connecticut is fairly cheap. There is a $120 filing fee, which is lower than the fees in many other states. This is ideal for small business owners who are just starting out and have little capital.
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What Is an Annual Report for an LLC in Connecticut?
The annual report for an LLC in Connecticut is a document that must be filed with the Connecticut Secretary of State every year by March 31.
How Do I Register a Foreign LLC in Connecticut?
To register a foreign LLC in Connecticut, you should file an Application for Registration of Limited Liability Company with the Connecticut Secretary of State, submit all legal documents and comply with state requirements.
Can I Be My Own Registered Agent in Connecticut?
You can be your own registered agent in Connecticut, as long as you are of legal age and have a physical address in the state.
Do You Need a DBA for an LLC in Connecticut?
You need a DBA for an LLC in Connecticut if you intend to operate under a fictitious name. File a Trade Name Certificate on the town where your business is located and pay the corresponding fee of $10.
How Do I Change the Address of My LLC in Connecticut?
To change the address of your LLC in Connecticut, file an Amendment of the Certificate of Organization with the Connecticut Secretary of State and pay the associated fee of $120. Be sure to include the new address for your LLC and the effective date of change.
Can You Domesticate an LLC in Connecticut?
You cannot domesticate an LLC in Connecticut. The best way to conduct the business is by registering a new limited liability company with the state. Another option is to file for a foreign entity in Connecticut and complete the registration process.
Does an LLC in Connecticut Have an Income Tax?
An LLC in Connecticut does not have an income tax, unless the company is taxed as a C-Corporation.
Does an LLC in Connecticut Have a Franchise Tax?
An LLC in Connecticut have a franchise tax if the company is taxed as a C-Corp.
Starting an LLC in Connecticut
If you are thinking of starting a business in Connecticut, the process is relatively easy.
However, there are a few things to keep in mind when registering your new LLC.
For help with the process or for more information about what is required to start an LLC in Connecticut, be sure to contact ZenBusiness who can assist you and help you avoid any potential legal issues.