How to Start a Business in Connecticut
To start a business in Connecticut, all you have to do is sell something. Bang, you're automatically a sole proprietor. But some better questions may be these: how do you actually make money? Minimize risk? And stay aboveboard legally? Connecticut is an expensive place to do business, but skilled workers, proximity to major metro markets, and incentives for small businesses make it worth it. From choosing an entity type to registering a trademark, our guide will tell you everything you need to know.
Ready to Start a Business in Connecticut?Let's Get You Started
Pick a Business Structure
Name Your Business
File Formation Paperwork
File a Connecticut Annual Report
Draft Internal Records
Get Connecticut Business Licenses
Organize Your Money
Get Business Insurance
Understand Your Tax Burden
Build Your Business Website
Apply for Trademarks
1. Pick a Business Structure
When you start a business without filing registration with the state, you are automatically a sole proprietor (or a general partnership, if you began the business with one or more partners). In either one, there’s no legal separation between you and your business. This means that the owners are liable for any action against the company. So if the business is sued or goes bankrupt, you (and any partners) stand to lose your own assets like savings, real estate and other personal property.
To protect your assets, you can form a legally separate entity with its own liability. The most widespread limited liability business entities are LLCs and corporations.
Connecticut Limited Liability Company (LLC)
An LLC provides flexibility along with limited liability protection, making it a popular structure for small businesses. LLCs can be run by the members with ownership stakes in the company, or by a manager or managers hired by the members. LLCs are also flexible in their tax structure, with the option of either being taxed like a partnership or a corporation. Your company will need to register with the Secretary of State’s Business Services Division to start a Connecticut LLC.
A corporation is less versatile than an LLC, but strict structure and rules are exactly what make it attractive to investors and lenders. In a corporation, shareholders appoint a board, and the board then elects officers to run the business. That structure, along with thorough record-keeping for shareholder and investor accountability, gives corporations a leg up with cautious investors. To form a Connecticut corporation, you’ll need to register with the Secretary of State’s Business Services Division.
Can an LLC be just one person?
Yes! A one-person LLC is called a single-member LLC. Single-member LLCs are one of the most common kinds of businesses in the country. For the most part, single-member LLCs are just like multi-member LLCs, but there are some slight differences in how they file taxes and protect personal assets.
Read all about Single-Member LLCs.
What about a Connecticut nonprofit?
If you want to form a corporation to benefit the general public or a group’s shared interest, you can form a Connecticut nonprofit. This process begins by filing a Certificate of Incorporation – Nonstock Corporation with the Secretary of State. But to get tax exempt status, you’ll have to apply with the IRS and register with the Connecticut Department of Consumer Protection – Public Charities Unit.
Alternatively, your corporation can elect to become a Benefit Corporation—operating under the same rules as a normal corporation, but with a corporate purpose that includes benefits to society or the environment.
Want to learn more? Check out our Nonprofit Guide.
2. Name Your Business
More goes into naming a business in Connecticut than you might expect.
Without a separate entity like an LLC or corporation, you’re stuck using your own first and last name for your business (George Smith) or getting a DBA for something more descriptive (like Georgie’s Handyman Service).
For an LLC or corporation, you’ll need a name for your company that conforms to Connecticut’s requirements. The name must:
- Be distinguishable from other businesses on record in Connecticut.
- Include a proper identifier, like “LLC” for a limited liability company or “Inc.” for a corporation—Connecticut also allows corporations to include comparable foreign words or abbreviations for these identifiers, such as “Societa per Azioni” or “S.p.A.”
- Not use misleading words like “charity,” “police,” or “doctor” if your business isn’t these things.
Find out if your desired name is available in Connecticut by using the Connecticut Business Records Search.
Can I reserve a business name in Connecticut?
Yes. If you know what you want to name your business, but want to wait to form your business, you can reserve it in Connecticut for up to 120 days—starting from the day the reservation is filed–with an Application for Reservation of a Name and paying a $60 fee.
What's a DBA?
A DBA (“doing business as”) is any name your business operates under that isn’t its legal name.
If you’re a sole proprietor, that name is automatically your first and last name. If you have an LLC or corporation, your business’s legal name is the one listed on your formation documents. If you want to use any other name, you have to register a DBA (called an assumed name or trade name in Connecticut) with your local city or town clerk.
See a list of Connecticut town clerks to find out where to register your DBA.
What about trademarked names?
It’s a good idea to check with the US Patent and Trademark Office (USPTO) to make sure your business name hasn’t been trademarked by someone else. If it has, and you use it anyway, there’s a chance that the business could come after you for infringement.
3. File Formation Paperwork
To officially start your business, you’ll need to file formation documents with the Connecticut Secretary of State.
- To form a Connecticut LLC, file a Connecticut Certificate of Organization.
- To start a Connecticut corporation, file a Connecticut Certificate of Incorporation.
You’ll need to list a Connecticut registered agent on either form who will handle your legal mail. Once the form is complete, send it on to the Connecticut Business Services Division. Forms can be submitted online, by mail, or in person.
Note: The information you provide on this form becomes part of the public record. What does that mean? The names and addresses on the document will be searchable online on the Connecticut Business Records database, where anyone can find it.
What is a registered agent?
Your company’s registered agent can be a person—a friend, family member, employee, or even you yourself as an owner—or a professional registered agent service. The registered agent’s primary responsibility is receiving legal mail on behalf of your company.
Under Connecticut law, your registered agent must have a physical address in the state and be available there during business hours in order to receive service of process. This can be tough for business owners who need to work at multiple sites or travel. As a result, many businesses opt to hire a registered agent service like Northwest as their business’s point of contact.
How can I keep my information off the public record?
If you want to keep as much of your information private and off-record as possible, a professional registered agent service like Northwest might be your best bet. A quality registered agent will list their address on your company’s formation documents instead so you won’t have to put yours on the public record.
4. File a Connecticut Annual Report
Connecticut corporations must file an Organization and First Report form within their first ninety days (LLCs, luckily, are exempt from that immediate requirement). This filing requires much of the same information as the Certificate of Incorporation, plus the names and addresses of your corporate directors and officers. The Organization and First Report carries a $150 fee. After that first report, you’ll have to file an annual report every year online via the Connecticut Business Services Division Online Filing System.
Annual report fees in Connecticut vary based on the type of business, as follows:
- LLCs: $80
- Corporations: $150
- Nonprofits: $50
Read more about how to file a Connecticut Annual Report.
What if I don’t file an annual report in Connecticut?
Connecticut does not charge late fees for failing to file an annual report. However, your business will no longer be in good standing. If you stay delinquent for over a year, your business could be administratively dissolved.
5. Draft Internal Records
So far in this guide, we’ve dealt with public forms that you’ve had to file with the Connecticut Business Services Division. Now, it’s time to organize your internal records. These are the documents your business will keep on record within your company.
Though these documents are internal, you’ll likely need to show them to third parties like the bank or—if you start a nonprofit—the IRS.
Here are the major internal documents you need to organize for LLCs and corporations:
Connecticut LLC Operating Agreement
This is your LLC’s rule book. It defines how your LLC will do things like make decisions, distribute money, manage operations, and appoint officers. Your operating agreement plans for every big picture scenario your LLC is likely (or unlikely) to face, including dissolution.
Drafting an operating agreement is hard, and the internet is full of shabby templates that have been copy and pasted from who knows where. So we had our attorneys draft a Connecticut LLC Operating Agreement that you can use as a solid foundation.
Connecticut Corporate Bylaws
Bylaws are the rules your corporation will adopt and follow internally. Bylaws detail how your corporation will appoint directors and officers, hold shareholder and board meetings, and handle emergencies, among other things. Unlike operating agreements, corporate bylaws are required by law in Connecticut (CT Gen Stat § 33-640).
As with operating agreements, you can find plenty of bylaws templates online. But bylaws are pretty serious, so you don’t want to just use the first template you come across. Our attorneys drafted a Connecticut Corporate Bylaws template you can use to get started.
Starting a nonprofit? Learn about Connecticut Nonprofit Bylaws.
6. Get Connecticut Business Licenses
Connecticut has no one-size-fits-all license applicable to every possible variety of business that exists in the state. However, that doesn’t mean business licenses are uncommon in Connecticut. Between the state-level sales and use tax permit, local and occupational licenses, and even in some cases federal licensing, virtually every kind of business in Connecticut will likely require at least one license.
Connecticut Sales and Use Tax Permit
The primary state-level permit that applies to most Connecticut businesses is a Sales and Use Tax Permit. Any business making taxable income from the sale or rental of goods or services must acquire a Sales and Use Tax Permit from the Department of Revenue Services while getting a Connecticut Tax Registration Number.
Professional Business Licenses
What do public accountants, tattoo technicians, home inspectors and podiatrists have in common? Under Connecticut Statute Title 20, those professions—along with many others that require specialized training or education to safely perform—require licensing or certification from either the Connecticut Department of Consumer Protection, Department of Public Health, or one of several occupation-specific examining boards. To legally practice these occupations, you must apply with the Connecticut board overseeing your industry.
Local Business Licenses
Depending on what kind of business you’re doing and where you’re doing it, you might need a city or a county business license. In Stamford, for example, all businesses must obtain a city license linked to a trade name in order to operate. In other cities, only certain businesses do—such as hotels or pawnbrokers in New Haven, or mobile vendors and laundromats in Hartford.
Learn more about How to Get a Business License.
How do I get a Connecticut Sales and Use Tax Permit?
The Department of Revenue Services supplies an application form, on which you’ll provide information about the nature of your business and the products and services it will offer for sale. This must be done for each location your company conducts business from. You can submit the Sales and Use Tax Permit application online or by mail.
How much does it cost to get a Connecticut Sales and Use Tax Permit?
Registration for a Sales and Use Tax Permit costs $100. Fortunately, it automatically renews every two years, and no further charge is required after the initial registration—that is, unless as noted above, the business opens a new location.
How do I get a professional license in Connecticut?
Each Connecticut certification board has its own standards for acquiring a license. As a result, the application process and associated fee will vary depending on the board regulating your service. Each board is usually made up of professionals and members of the public appointed by the governor.
How do I get a local business license in Connecticut?
Every county or city has different requirements for the business licenses they offer. A laundromat owner in Hartford, for example, must file an application with the city’s Department of Development Services and pay a $10 fee. Meanwhile, in Middletown, a home business must submit a free Residential Unit Business Pursuit application to the city’s Planning and Zoning Department.
7. Organize Your Money
The liability protection you get from forming an LLC or corporation is only as strong as the separation between you and your business. At a minimum, you’ll need to open a bank account for your business. And if you’re going to hire employees, you’ll need to tackle payroll, too.
Open a Business Bank Account
To keep your business spending separate from your personal spending, you’ll need to open a business bank account. If you don’t, a court could find that your business is not actually separate from you, the owner, under the Alter Ego Doctrine. Also known as piercing the corporate veil, this is the outcome when a judge finds that a company is not a separate entity but rather an alter ego of the owner. If this ever happens, you could lose your limited liability status.
Opening a business bank account as a sole proprietor is important, too. Though sole proprietors and general partnerships have no limited liability status to protect, both will benefit from organizing their business finances come tax season.
How do you set up a business bank account?
LLCs and corporations will need to provide the bank with their formation documents, operating agreement or corporate bylaws, EIN, and in some cases, a Corporate Resolution to Open a Bank Account or LLC Resolution to Open a Bank Account.
Do I need a business bank account to accept credit card payments?
Probably. Payment processors require you to provide them with a bank account. This is where they’ll deposit funds from transactions. Most of the time, this needs to be a business bank account.
Some payment processors may let you get away with listing a personal bank account, but it’s not a great idea. Mixing your business finances with your personal finances erodes the separation between you and your business, weakening your liability protection. It also turns tax season into a nightmare.
Learn more about Payment Processing.
Set up Payroll
If your business will require you to hire employees or independent contractors, you’ll have to set up a payroll system. Payroll setup in Connecticut includes:
- getting an EIN
- registering for a Connecticut Tax Registration Number
- determining the rates you’ll need to contribute for unemployment insurance tax
- decide on whether to hire employees or independent contractors
- prepare the payroll forms you will give your employees
- choose a payroll service or software
- decide on a payroll schedule
Establishing your payroll system can be complex, but any worthwhile service or software will be able to withhold taxes, file returns for your company, and provide you with a mechanism to pay your employees, whether by direct deposit or with old-fashioned paper checks.
What forms do my employees need to fill out?
Your new employees will need to fill out a W-4 to determine how much you’ll withhold and an I-9 to verify that the employee is eligible to work in the US.
What’s the difference between an independent contractor and an employee?
It’s important to understand the difference between an independent contractor and an employee. That’s because for employees, you’ll need to withhold and pay income, social security, and Medicare taxes. Independent contractors pay these taxes on their own.
An independent contractor is self-employed—how they complete their work is not directly controlled by an employer. An independent contractor may perform the same kind of work for other businesses, and can do the work when and how they choose.
An employee, on the other hand, performs their work how and when their employer chooses.
If you’re unsure, you can file Form SS-8 with the IRS and let them decide.
Learn everything you need to know about hiring independent contractors.
How do I get a Connecticut Tax Registration Number?
You can register for a Connecticut Tax Registration Number via the Connecticut Department of Revenue Services online system, myconneCT. When you register, you can also register for withholding tax at the same time.
8. Get Business Insurance
Forming an LLC or corporation protects your personal assets. But if anything disastrous befalls your business—like a lawsuit, burglary, flood, or fire—your business is on the hook to pay. Business insurance can help cover the costs.
Is business insurance mandatory? Connecticut requires workers’ compensation insurance in most cases, but whether or not your company needs other types of insurance ultimately comes down to whether you’re comfortable living with risk.
Here’s a breakdown of the most commonly purchased business insurance:
Workers’ Compensation Insurance
Workers’ compensation insurance is required by law in Connecticut if your business has at least one or more employees working a minimum of 26 hours a week. Any business that fails to provide that insurance can be fined $500 per employee, plus an extra $100 for every day the company is in violation. You can buy a workers’ compensation insurance plan through an insurance company.
This covers the costs of claims against your business for injuries or damages to the property of others, like clients or customers. This includes medical expenses, legal fees, settlements, and judgments. Whether or not you need it depends on whether your business is likely to be sued and how many assets your business needs to protect. If it’s just you and your computer in your basement, you might feel comfortable skipping liability insurance. Or maybe you won’t. Beyond general liability insurance, you can purchase or add on more specific types, like professional, cyber, commercial, home-based business, or product liability insurance.
Do business owners need workers' compensation insurance in Connecticut?
Workers’ compensation insurance is only required by law in Connecticut for employees. Sole proprietors, partners, corporate officers and LLC members aren’t considered employees in Connecticut and can be exempt from coverage. But with the possibility of personal health insurance denying a claim for business-related injuries, you may decide it’s best to enroll yourself on your business workers’ compensation insurance plan.
Do I need business insurance for my home-based business?
Probably. That’s because you can’t count on your homeowners’ or renters’ insurance policy to cover damages related to your business. Most insurance companies offer a home-based business insurance plan.
9. Understand Your Tax Burden
Connecticut has fairly high taxes compared to some other states, though a number of different credits and exemptions exist to help mitigate the cost. Still, you should prepare for higher than average tax bills, especially if your company is taxed as a C-Corporation. Plus, your tax burden isn’t solely based on state rates; you’ll also likely have to consider federal and local taxes as well.
- LLCs. Single-member LLC? By default, you’re taxed similar to a sole proprietor. More than one LLC owner? You’re taxed as a general partnership. Either way, your default tax status is “pass-through,” which means you don’t pay corporate taxes. Instead, your LLC’s owners report profits and losses on their personal tax returns. Good news: because there’s no state income tax in Connecticut, you’ll only have to pay the 15.3% federal self-employment tax rate. An LLC can file paperwork with the IRS to be taxed as an S-Corp or C-Corp instead.
- Corporations. Corporations are taxed as C-Corps by default. This means that corporations pay the 21% federal corporate tax rate and the applicable Connecticut corporate tax rate.
To pay your federal taxes (and take a good deal of other steps required to start a business), you’ll need to get an Employer Identification Number (EIN). You can apply for one with the IRS or hire us to get one for you.
Do I need an EIN if I’m self-employed?
If you’re operating a sole proprietorship or single-member LLC that doesn’t employ anyone else and you don’t need to file excise or pension plan returns, you don’t legally need an EIN.
However, you can still get one—and you probably should. Otherwise, you’ll have to use your own social security number to do business. Plus, you’ll likely need an EIN to open a business bank account.
How do I get an EIN?
To get an EIN, you can either apply online or file form SS-4 by mail with the IRS. Getting an EIN is free.
Check out our guide to applying for an EIN.
What is an S-Corp?
An S-Corporation is a federal tax election. Registered business entities like LLCs and corporations start out with a default tax status, but can file paperwork with the IRS to be taxed as an S-Corp. Like LLCs, S-Corps are taxed as pass-through entities. Like corporations, S-Corps can make distributions that aren’t subject to the 15.3% self-employment tax.
Learn more about the S-Corp tax election.
What is a C-Corp?
A C-corporation is the default federal tax election assigned to corporations. Most corporations are taxed as C-Corps, but LLCs can also apply for C-Corp tax designation by filing paperwork with the IRS. C-corps file federal corporate income taxes and state corporate income taxes (in Connecticut, the corporate business tax only applies to C-Corps, determined by your corporation’s net income or capital base—whichever value greater after their respective 7.5% and 0.31% tax rates—plus, a 10% surtax applies to corporations with $100 million or more in gross income). C-corps can pay their shareholders in distributions, and the shareholders report those profits on their personal tax returns.
Learn more about the C-Corp tax election.
Connecticut Local Taxes
Technically, Connecticut does not have any additional city or county-level business taxes, which extends to sales tax as well, so you’ll find a rate of 6.35% statewide. However, while that may seem like a boon to businesses, it comes with a big downside. Without the means to collect revenue through local income or sales tax, local governments instead do so via property taxes. As a result, businesses that own real estate will likely have to shell out the cash come property tax time—and businesses that do not own real estate will have to pay more for a lease than they might otherwise, in order to offset an owner’s tax burden.
10. Build Your Business Website
If you want Connecticuters to find your business, they have to be able to find you online. This means you’ll need a website, a business email account, and social media accounts. Don’t worry if you’re not especially tech-savvy—you don’t have to be a web developer or an influencer to establish a robust online presence. You’ll just need the following:
- Domain name. Your domain is the address where your website will live. You’ll want a domain name that is short, unique, local, and—most importantly—available. If your domain is trademarked, you could face legal trouble.
- Domain registrar. Once you’ve decided on a domain name, you’ll want to register it with a domain registrar. Some domains are more expensive than others. Some domain registrars also offer hosting and most will provide you with a business email that includes your domain name (“email@example.com”).
- SSL certificate. An SSL certificate signals to your users that your website is secure. If your website will use forms—like a sign-up form or a “contact us” form—an SSL certificate is critical. But even if you don’t you use forms, you’ll still probably want one—it allows an encrypted connection, which means your users’ data is transported securely. There are several types of SSL certificates, and you can often get one through your domain registrar.
- Site design. The easiest option is to use a free website creation tool—there are a number of free options available. Most are easy even for a newcomer to use, with styles and built in templates. For a more custom design, you can hire a web designer to work on your website, but this will be much more expensive.
11. Apply for Trademarks
A trademark is a design, symbol, word, phrase—or any combination thereof—that represents a brand’s goods or services exclusively. Only some businesses register trademarks.
You can apply to register your trademark with the State of Connecticut or federally with the U.S. Patent and Trademark Office (USPTO). Registering your trademark in Connecticut is cheaper and easier than registering with the USPTO, but doing so only protects your trademark in Connecticut.
You can only register a trademark once you’ve started using it (so slap it on that website you just made), and not all applications are approved. Trademark law is complex, and the strength of a trademark application (and the trademark itself) depends on many factors.
Our attorneys can review your application, offer advice, and prepare and submit the application for you—Check out our Trademark Service.
How do I register for a trademark in Connecticut?
To register a trademark in Connecticut, you’ll need to file an Application for a Certificate of Registration of a Trade or Service Mark with the Secretary of State and pay a $50 filing fee. Attach three examples of your business using the mark to the application in order to help prove a connection exists between the mark and your company’s’ goods or services. A trademark can’t be registered in advance, only after you use it.
Can I register a trademark before I use it?
No. But you can file an application with the USPTO under Intent-to-Use status. This gets your application in line before you’ve actually used the mark, which could be helpful if you’re worried someone else might register your mark before you’ve had a chance to use it.
For your trademark to become official, you’ll eventually need to show proof that you’re using it. An Intent-to-Use application buys you some time to do that.
Learn more about filing an Intent-to-Use Trademark.