Starting an LLC in Connecticut is a relatively simple process that can offer your business some significant benefits. This article will walk you through the steps necessary to form an LLC in Connecticut.
We will also discuss some of the critical advantages of doing so. If you're thinking about starting a business in this state, a Connecticut limited liability company should be at the top of your list.
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.
An LLC represents a separate legal entity from LLC owners and, as such, is responsible for its business debts and obligations.
This separates the personal assets of the Connecticut LLC members from the business assets and liabilities.
A limited liability company is a legal entity that allows business owners to protect their assets in the event of a lawsuit or other legal action.
This business structure is also popular because it offers tax flexibility. A company may also be helpful when it comes to tax planning since profits and losses can be passed through to shareholders and taxed on their individual returns.
LLCs can be taxed as a single proprietorship, partnership, or corporation, depending on how members structure their company.
The membership and management structure of a Connecticut LLC is also very flexible. There is no minimum or a maximum number of members, and the members can manage the company themselves or appoint managers to do so.
In order to conduct business under this structure, 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 also comply with Connecticut's naming guidelines.
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. You can also check the Connecticut Secretary of State's business name database.
If your business name is available, you can apply to reserve a business name with the Connecticut Secretary of State. Your limited liability company name will be reserved for the next 120 days by completing this process.
There is a $60 filing fee for filing an Application for a Reservation of Name.
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 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
Agent service is an organization that is appointed by the LLC to receive service of process on its behalf. This means that if your LLC gets sued, the registered agent will be notified and will be responsible for forwarding any legal documents to you, such as the operating agreement.
There are a few things to keep in mind when appointing a registered agent:
- The registered agent must be a resident of Connecticut or a business 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 down the road.
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 taxes 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, LLCs 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 Are the Benefits of Connecticut LLCs?
An LLC in Connecticut offers a number of benefits, including:
- 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.
An LLC might not always be the best option for a business, but it can be a great way to get started.
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.
FAQs
What Is an Annual Report for an LLC in CT?
The annual report for Connecticut LLC is a document that must be filed with the Connecticut Secretary of State every year by March 31. Annual reports must include information about the LLC's members, managers, and registered agents.
There is an $80 filing fee for the annual report in Connecticut. If you don't file your annual report on time, you may be subject to penalties that reflect losing the status of good standing with the state.
If an LLC still fails to file an annual report after one year, the Connecticut Secretary of State will dissolve it.
How Do I Register a Foreign LLC in CT?
Registering a foreign LLC in Connecticut entails a similar process as registering a domestic LLC. The first step is to complete file a Connecticut Application for Registration of Limited Liability Company, which can be found on the Connecticut Secretary of State website.
This document requires information about your company's name and purpose. The filing fee for a foreign LLC is the same as for domestic LLCs ($120), and you can file online, by mail or in person. Next, you'll need to appoint a registered agent for your business and complete the remaining paperwork otherwise required for all business entities.
Can I Be My Own Registered Agent in CT?
Yes, you act as your registered agent in CT. There are a few things to keep in mind, though.
You must have a physical address in Connecticut where notices and other official documents can be delivered, and you must be available during normal business hours to accept service of process on behalf of the LLC. This can be time-consuming and may not be the best option if you're already preoccupied with running your business.
Do You Need a DBA for an LLC in Connecticut?
Yes, but it depends on whether you want to operate as a sole proprietorship, partnership, or corporation under a name that is not in your Certificate of Organization. If you want to work under a different name, you have to apply for a DBA.
The form to reserve a name with the Connecticut Secretary of State may be found on the website. There are several forms for different types of business entities, so you need to be careful and pick the correct one to avoid being rejected by the licensing authority.
How Do I Change the Address of My LLC in CT?
Changing the address of your Connecticut LLC entails filing an Amendment of the Certificate of Organization with the Connecticut Secretary of State.
You will need to include the new address for your LLC, as well as the effective date of the change. There is a $120 filing fee associated with this amendment.
Can You Domesticate an LLC in CT?
No, you can't domesticate an LLC in CT. You would have to file paperwork to establish the LLC in Connecticut and then dissolve the LLC in the state where it was originally established. Another option is to file for a foreign entity in Connecticut and complete the registration process.
This will allow the LLC to conduct business in Connecticut. Whichever route you choose, make sure you speak with an attorney to ensure that all of your paperwork is filed correctly.
Does CT Have an Income Tax?
Yes. Every individual or business entity in Connecticut has to pay income tax according to their income. There are a few different tax rates, and the amount you pay will depend on the type of business entity you form.
You can find more information about income tax through the Connecticut Department of Revenue Service website.
Does Connecticut Have a Franchise Tax?
Yes, but only if your LLC is a corporation. If your LLC is a partnership or sole proprietorship, you don't have to worry about the franchise tax.
When a corporation is incorporated, it must pay a franchise tax to the Secretary of the State. When there is an expansion in the number of authorized capital stock, it has to be followed by an additional tax payment.
Conclusion
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 ZenBusines who can assist you and help you avoid any potential legal issues.
Our #1 Recommendation
ZenBusiness
