Fact checked for accuracy by Billie Anne Grigg, a bookkeeper and Mastery Level Certified Profit First Professional.
Starting a business may seem complicated and challenging, but the steps are pretty simple and easy to follow. A limited liability company, or LLC, is a business structure that offers the flexibility of a sole proprietorship with some of the legal protections of a corporation.
Although it may seem easier to stay as a sole proprietor, this business structure won’t protect your assets if you get sued or incur business debt. If you’re interested in forming an LLC, follow these steps.
Are you thinking about starting a new business? Read this comprehensive guide on how to form an LLC in Connecticut.
If you want help forming your LLC, ZenBusiness is our top pick for fast and affordable LLC setup, all online.
Step 1: Choose a Name for Your Business
When you are ready to begin forming your LLC, the first step is to choose a name. It’s easy to get hung up on what to name your business, but this step is for legal purposes only.
The name you choose to represent your business legally is not the exact name you must use for marketing and advertising purposes. Once you form your business, you can assume a DBA (Doing Business As) name that customers will see.
Naming Guidelines for an LLC in Connecticut
Before deciding on your business name, check that it meets Connecticut’s naming requirements.
- The words “Limited Liability Company,” or a mix of approved abbreviations such as LLC, Ltd., or Co., must follow the business name. For example, “The Sandwich Emporium Limited Liability Company” or “The Sandwich Emporium, LLC.”
- Your business name cannot be associated with government entities, such as a treasury or state department.
- The business can’t have the same name as another business in Connecticut. It has to be distinguishable. If someone in your state has a business name of “Sandwich Shop,” you could not use “The Sandwich Shop,” as the term is too similar.
- If your business name includes the words like attorney or bank, you will have to submit additional paperwork proving that you are an attorney or a bank.
For more information about naming guidelines in Connecticut, read the Connecticut State Statute.
Once your name meets all the above requirements, do a quick search in the Connecticut Business Records Search to ensure the name is available.
When you finish with the business records tool, you will have the option to reserve the available name. Reserving the name will hold it for you while you complete the registration process. Also, check a domain registrar like GoDaddy and secure your business domain.
Step 2: Decide on a Registered Agent
A registered agent in Connecticut serves as a point of contact for receiving business notices and payment reminders. The registered agent will also receive any mail associated with lawsuits.
The registered agent must have a physical address in Connecticut, not a PO box. They must also be available during business hours Monday through Friday.
If you meet the above requirements, the easiest option would be to be the registered agent; if not, you can find a trusted friend or family member to act as your agent. The last option would be to hire a registered agent in Connecticut.
Step 3: File Articles of Organization
To register your business in Connecticut, file your certificate of organization with the Secretary of State. You can file your certificate online, in person, or by mail. Keep in mind that there are longer processing times if you choose to file by mail.
To file your certificate of organization, you must provide this information:
- Your business’ name and address
- NAICS code – use this tool to search for your industry and find the associated code. A NAICS is a code identified with your industry that will help you find appropriate licenses and permits for your business.
- Business email address
- Name and address of your registered agent
- Signature of the organizer filling out the form
Step 4: Create an Operating Agreement
Although not required in Connecticut, you should prepare an operating agreement. Without this agreement, the state can control the operation of your LLC.
An operating agreement lays out the management structure, profit percentage, and what happens if a member wants out. This document is also proof that your business is a separate entity in case of a lawsuit.
If any conflicts arise between members, this document will serve as a reference.
Step 5: Comply With Connecticut Regulatory Requirements
If your LLC has more than one member or plans on hiring employees, you need to acquire an Employee Identification Number (EIN). You will also need an EIN if you plan on having your business taxed as a corporation or if you open a business banking account. An EIN is necessary for building business credit, too.
The easiest way to obtain an EIN is to apply online through the IRS website, or you can apply by mail, phone, or fax. There is no fee to obtain an EIN, and if you file online, the IRS will issue the number immediately.
Depending on the type of business you run, you may need local and state business licenses. Use this license lookup on the Secretary of State’s website.
Step 6: Register With the Department of Revenue
You will need to register with the Connecticut Department of Revenue Services (DRS). Apply online to receive your revenue number immediately.
The registration cost is a one-time fee of $100. The DRS will automatically renew the license every two years at no additional charge.
Cost to Start an LLC in Connecticut
There are various costs involved with starting a business entity in Connecticut. This section will only cover the fees involved with forming the LLC and not the total cost of starting a business.
- $60 to reserve your business name before filing the Certificate of Organization. This reservation will hold the title for no more than 120 days.
- $120 to register the business with the Secretary of State.
- $100 if you register with the Department of Revenue
- $5 to $10 if you choose to register a DBA (will vary by city)
- $80 to file the annual report
If you choose to hire a registered commercial agent or a lawyer to help file paperwork, the cost of forming an LLC can be much more.
What to Do After Forming Your LLC in Connecticut
Forming an LLC is the first step for any business. After you have created your LLC, consider doing the following:
Apply For S-Corp Treatment
LLCs are considered pass-through entities, meaning the business doesn’t pay taxes, but the owner does on their tax return. Pass-through entities are not subject to double taxation. However, there are some benefits to taxing an LLC as an S-corporation.
If you want to save on Social Security and Medicare taxes without double taxation, consider applying for an S-Corp treatment. It’s also a good idea to be taxed as a corporation if you are a multi-member LLC and plan on seeking outside investors.
To apply for S-Corp treatment, file a 2553 form with the IRS within 75 days from forming the LLC or 75 days from the start of the tax year.
Open a Business Bank Account
Opening a bank account for your business is crucial because it lets your customers and suppliers know that you are serious and professional. If you ever decide to obtain a business loan, most companies require you to have a business account open for a year at least.
To keep your personal and business expenses separate, you must open a business account. It will also ensure you can accept checks from clients.
To open a business bank account for an LLC, you will need an EIN, business formation documents, ownership agreements, owner IDs, and a business license, if applicable.
Start Building Business Credit
To build credit for your business, you need to apply for a business credit card. There are several reasons for wanting a credit card in your business name.
You have a paper trail every year of all your business expenses; this is helpful for audits and keeping track in general. It also furthers the separation between you and your business for legal purposes.
Building business credit is beneficial for obtaining future business financing as well.
Get Business Insurance
Most Connecticut businesses are required to have insurance to protect their employees. Business insurance keeps your business up and running, making you look credible. People are more likely to engage in business when they know you are adequately insured.
Look into getting general liability insurance or a Business Owner’s Policy. You may need different insurance depending on your industry.
Learn more about different business insurance policies.
Apply for a Trade Name
If you plan on operating your business under any name other than the one you registered with the State, you have to file a DBA. For each trade name you use, you must file a new DBA. You will need to file the trade names under the LLC to operate under the LLC.
To file a DBA in Connecticut, you have to register the name with your town clerk. Processing fees will vary by County but should be no more than $10.
To operate your business in another state outside of Connecticut, you must qualify for each state. Foreign qualification is registering your business with the Secretary of State in another state without having to incorporate a new business entity.
Once registered, you are free to pursue growth opportunities across state lines.
How to Keep Your LLC Compliant in Connecticut
The first step is to ensure you have the proper licensing to operate your business. Follow all federal, state, and local regulations to keep your business in good standing. The cost of a business license will vary by industry; some may even require you to take courses.
Ensure all employees are legally able to work in the United States and report all new hires to the State. You will also need to provide worker’s compensation, withhold employee taxes, and hang up workplace compliance posters.
LLCs must file an annual report. It’s a simple one-page form that only takes a few minutes. You won’t need to enter any financial information and only need to provide your contact information. It costs $80 to file an annual report in Connecticut.
Tax Filing Requirements for LLCs in Connecticut
You will need to register with the Department of Revenue Services to receive a seller’s permit if you are selling goods and collecting sales tax.
If you have employees, you will need to register for Unemployment Insurance Tax and Employee Withholding Tax.
For multi-member LLCs, fill out a 1065 Partnership Return form annually to the IRS. If you are a single-member LLC, use form 1040 Schedule C.
Frequently Asked Questions
Here are some essential questions and answers for forming an LLC in Connecticut.
How long does it take to register an LLC in Connecticut?
The fastest way to register your business is to form the LLC online through the Secretary of State’s website. Registering online is secure, and it only takes 2-3 days for the State to process your paperwork. You can expect to wait 2-4 weeks if you register by mail.
What tax structure should I choose for an LLC in Connecticut?
The tax structure you choose will depend on several factors. If you are a multi-member LLC or will be seeking outside investors, filing as an S-Corp may be more beneficial. If you are a single-member LLC that doesn’t plan on seeking outside investors, it may make sense to stay as a disregarded entity (taxed as a sole proprietor).
Should you hire an LLC formation service in Connecticut?
Forming an LLC in Connecticut is pretty straightforward. The State website has educational resources to help guide you for any confusing terms. There may be some instances where hiring a service can be beneficial.
Forming a business can be slightly more nuanced and confusing for multi-member LLCs. Hiring an attorney to look over and file documents on the members’ behalf might make more sense.
There are a lot of services that can handle all of this for you. Check out our recommendations for the best LLC service to explore some good options.
The Last Word
That’s about it for filing an LLC in Connecticut. Have questions? Feel free to reach out to our team; we’re always happy to help.
Filed under: Connecticut Business Guides