How to Start an LLC in Connecticut
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Formalizing an LLC is a process that the Connecticut Secretary of State’s office oversees. To become an official business in the state, you’ll need to follow their procedures and rules to ensure you are in good standing. The Secretary of State’s website lays out all the steps needed to help make the process simple for LLC owners.
It may be the third smallest state in the U.S., but Connecticut’s economy is thriving, including the over 355,000 small businesses that are present today. It takes a lot of hard work and dedication to maintain a business, employ other Connecticut citizens, and provide valuable goods and services to the community. But before this work can begin, anyone looking to start an LLC in Connecticut should review this step-by-step guide.
Name the LLC
Have a name in mind? See if it’s already listed in the state’s business directory. If the name comes up in a search, it’s taken. If it doesn’t, it’s yours to claim.
Before you can take any formal actions to start an LLC, you’ll need to pick an LLC name. This is one of the most important tasks when it comes to any business, as your name will be a part of your brand and help you tell customers what you provide.
It is also important for the registration process too, as the name you choose will be on all paperwork and be filed with the Secretary of State as a part of your business entity.
Whatever name you choose, it must be distinguishable from all other businesses in Connecticut, including LLCs and other management structures. You can use the state’s Business Registry Search to conduct a name search and check on name availability.
Remember that this guideline means not only that you can’t choose a name identical to an existing business, but anything similar enough to be confusing.
Connecticut state law requires this type of business to select a name following these rules:
- The name of an LLC must include the phrase “limited liability company” or an abbreviation like “LLC” or “L.L.C.”
- Names cannot include words that may imply the business is a government agency, like “Treasury” or “Department”
- Certain words like attorney, bank, university may require proof of a licensed individual to be an LLC member before they can be used.
If you have identified a name that meets all of the criteria, but you are not ready to register your LLC, you can file a name reservation for 120 days. There is a $60 non-refundable fee to do so, but no one else will be able to use the name during that time.
Before you move forward with a name, check online to see what comes up when you search for that name too.
Look into a matching domain name and social handles. You want to use your business name consistently throughout your online presence.
You can reserve a business name in Connecticut for 120 days.
Select a registered agent
Every LLC in Connecticut is required to name a registered agent as a part of its formation. A registered agent can be an individual or an entity who assumes responsibility for receiving tax forms, legal documents like service of process documents, and all official government correspondence on behalf of the business.
Essentially, they are the official point of contact between the LLC and the state.
The only requirements to be a registered agent are:
- An individual must be over the age of 18
- The person must have a physical mailing address in Connecticut, not a P.O. box
For a business, they must be authorized to transact in Connecticut.
Anyone, including the LLC members, can be this agent.
Registered agents are obligated to be available during all normal business hours in order to receive documents and correspondence. A failure to be available can be considered negligence on the part of the business and lead to culpability in lawsuits or missed deadlines. For this reason, many business owners prefer to use a registered agent service rather than an individual who may need time off or become sick.
File Certificate of Organization
When forming an LLC, the Certificate of Organization is the primary document that needs to be submitted to the Connecticut Secretary of State in order to register the business entity. This is similar to Articles of Organization in other states.
The Connecticut Certificate of Organization will require you to provide the following information:
- The name of your LLC
- The physical address of the LLC
- Register agent name and address
- Governing authority type, or whether the LLC is managed by members or managers
Once complete, the Certificate of Organization can be submitted to the Secretary of State online. If you prefer, you can also download the form and mail a printed copy to the Secretary of State’s office.
You can fill out and submit your LLC formation documents here.
For both online and postal mail filings, there is a $120 fee to file a Connecticut Certificate of Organization. This is non-refundable if the LLC is not formed for any reason.
Connecticut processing time
The expected turnaround time for a Certificate of Organization to become an LLC in Connecticut is 3 to 5 business days. For an additional fee, the process can be expedited.
Create an LLC operating agreement
Operating agreements are legal documents that outline the ownership and operating procedures for a business. In corporations, these agreements often need to be filed with the state and on record. For an LLC, no operating agreement is required by Connecticut, but it is still best practice to have one that is internal to the organization.
Having an official operating agreement is the best way to ensure all owners of the business are on the same page and to reduce any tensions that could arise in the future. Without an agreement in place, state LLC laws take effect, so it is preferable to set your own terms.
There are various free templates available that you can use to draft an operating agreement, and there is no one way they need to be done. Some businesses will choose to use an attorney skilled in business law, but this may not always be necessary. Most operating agreements will cover the following topics:
- Organization details: When the LLC is formed and with what members, as well as how ownership is divided if there are multiple members.
- Management and voting: Who manages the LLC (members or managers) and how members will vote on business matters.
- Capital: How much money each member invested, and how funds may be raised in the future.
- Distributions: The division of profits and losses among members.
- Changes to membership: How roles and ownership would be transferred if a member leaves the company, including buying out or replacing a member.
- Dissolution: What will happen if all members agree to dissolve the business.
A completed operating agreement signed by all members of your LLC should be kept on record internally and updated as needed.
Formalizing your LLC is the first step to doing business in Connecticut, but there is more you’ll need to tackle before you can move on to daily operations. Ensuring that you are in good standing with the state means taking care of all the administrative aspects of running a business and planning for those that will come up later.
Get your EIN
Because LLCs are pass-through organizations, owners are able to claim profits and losses on their personal tax returns. However, an LLC is still considered a separate business entity, and most will need to have a tax identification number separate from the members’.
An employer identification number, or EIN, is issued by the Internal Revenue Service (IRS) in order to act as a federal identification in this way. An EIN can be obtained by fax or mail, but if you apply on the IRS website, the number is issued immediately without any waiting period.
A single-member LLC with no employees does not usually need an EIN, as the member can use their personal Social Security Number. However, even when it is not required by the IRS, every LLC can benefit from an EIN.
Many banks and vendors will require one for certain transactions. Additionally, having an EIN prevents you from needing to supply your personal Social Security Number, which protects you against identity theft and other security concerns.
In addition to the federally issued EIN, the Connecticut state Department of Revenue Services also issues a tax registration number that is used to identify businesses for state tax purposes.
You can get your EIN by visiting the IRS website.
Get Connecticut business licenses
Before any transactions with a customer can take place, your LLC will need to have the proper licensure in place. There is very little federal licensing required unless you are in specific industries, but the state and local levels can have much more stringent requirements.
In Connecticut, there is no statewide general business license. The main permit at this level is the sales and use tax permit or seller’s permit. Any business that sells, rents, or leases goods, sells a taxable service, or operates a hotel or motel must obtain this license, which allows them to collect and remit sales tax on behalf of the state. The seller’s permit can be obtained at a local state government field office or through Connecticut’s Taxpayer Service Center website.
Some professions will require additional state licensing, and many local governments have additional requirements. The city or town clerk where your business is located will be able to help you determine all the permits and licenses your LLC will need.
Open business bank accounts
In addition to the tax benefits, one reason that many entrepreneurs choose an LLC for their business structure is the protection of personal assets. Under an LLC, the member’s personal assets cannot be taken to pay off debts or legal obligations that belong to the business. This protection is often referred to as the corporate veil. However, if this situation ever arises, you may need to prove that the LLC is a separate entity financially, and having separate bank accounts is a great way to do this.
Businesses can open checking and savings accounts in their name, which allows them to condense all expenses and income into their own accounts. Not only does this help with asset protection, but it makes accounting easier and can simplify the process of preparing your tax returns each year. A company will also be able to apply for credit cards based on its own credit profile, so having financial records can work in your favor.
Review LLC tax rules in Connecticut
Any LLC in Connecticut is able to take advantage of the pass-through status of the entity, allowing members to reflect profits and losses on their personal income taxes.
If the LLC has any employees, it will also be responsible for employer taxes to both the federal government and Connecticut. Within the state, the business will need to withhold and pay all employee income taxes to the Department of Revenue Services on a periodic basis. It is also required that you file an annual reconciliation of the LLC tax withholdings. Additionally, the Connecticut Department of Labor will require you to pay state unemployment taxes on a quarterly basis.
Connecticut also requires that an annual report is filed each year for each LLC. This is due by March 31st and includes an $80 filing fee. It is very important to meet this deadline – rather than imposing late fees, Connecticut automatically places any LLC that is late into a “Not in Good Standing” category and is able to dissolve an LLC after one year of not filing proper annual reports.
Some states refer to the annual report as a Statement of Information.
Get insurance for your LLC
Any business can become the subject of a lawsuit, no matter the size or industry. For this reason, it is important that all LLCs have some kind of insurance in place. Without coverage, the business can be held responsible for any claim costs that may come up.
An LLC does have personal liability protection, which protects your personal assets. However, every LLC owner should consider insurance for their new business.
The primary kind of insurance you will want to look for is general liability insurance, which protects against financial loss in a range of categories. Bodily injury or property damage caused by your business, employees, or products are the most common uses of this coverage. Some businesses may also look for professional liability insurance, which covers mistakes made during certain professional services.
Connecticut does not require LLCs to have workers’ compensation insurance, but it can be beneficial to have. Other potential coverage options could include commercial auto insurance, business income insurance, or commercial property insurance.
Additional resources to help you set up a business in Connecticut
Connecticut’s official government websites offer a variety of resources for current and future business owners.
Does Connecticut have Articles of Organization for LLCs?
In Connecticut, the main document needed to form an LLC is called the Certificate of Organization. In other states, you’d file Articles of Organization or a Certificate of Formation. The name varies by state.
Do Connecticut LLCs pay extra taxes?
An LLC startup in Connecticut is afforded the same pass-through status as other LLCs. Federal taxes and state taxes are paid via personal tax returns.
The state used to impose an additional Business Entity Tax on each LLC. The tax was $250, but as of 2018, the tax was no longer required.
Do LLCs file annual reports in Connecticut?
LLCs in Connecticut must file an annual report with the Secretary of State by March 31st of each year. There is an $80 filing fee associated with the report. A late report will lead to a “Not in Good Standing” status and your LLC could be dissolved after one year if this report is not filed properly.
Does Connecticut have Certificates of Good Standing for LLCs?
Connecticut issues a Certificate of Legal Existence, which is similar to Certificates of Good Standing in other states. This verifies that the LLC has been legally formed and properly maintained. While this is not issued automatically, you can always request one through the Secretary of State if a vendor, bank, or client needs to see it.
Do registered agents need to consent to be appointed in Connecticut?
During the process of forming an LLC, registered agents do not need to sign any forms or formally consent. However, if you are changing your registered agent, there is a requirement that the new agent signs the Change of Agent form for paper filing or acknowledge their appointment in online forms.
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