Connecticut LLC (6-Step Guide) – How to Form an LLC in Connecticut

Start an LLC in Connecticut Today With Help of Professionals

If you are looking to start a business or upgrade your current one, then it may be time for you to consider forming a Connecticut LLC. With a Connecticut LLC, you can provide your business with a potentially far lower tax burden. Plus, you can shield your personal assets in case of lawsuits or business failure.

There is nothing to lose with this structure, and Connecticut has some of the highest availability of venture capital in the country, making it easier to get the funding you need. Now let’s take a look at why you should consider this structure, some of its pros and cons, and then how you can form your own Connecticut LLC in only six steps.

Why Would You Want a Connecticut LLC?

So, this is the big question, why would you want a Connecticut LLC. Let’s take a look at some of the biggest reasons.

  • Protection for Your Personal Assets: Every entrepreneur is concerned about the possibility of business failure or facing a lawsuit and losing their personal assets. With a Connecticut LLC, you don’t have to worry! Your personal assets can not be held liable for business debts under most circumstances.
  • Reduced Tax Burden: A Connecticut LLC benefits from pass-through taxation, meaning unlike a corporation, your business will not be taxed as an entity. This means no double-taxation; instead, you will only pay taxes on any earnings on your personal tax return.
  • Easier Maintenance: Corporations that benefit from similar liability protection are burdened by many requirements and mandatory management structures that make maintaining your business difficult. A Connecticut LLC faces none of these requirements and generally will need to do little more than file an Annual Report with the state.

Quick Connecticut LLCs Pros & Cons    

Chances are you are a busy person like most entrepreneurs, and you don’t have a lot of time. So, we will make this quick and show you some of the biggest pros and cons of a Connecticut LLC so you can make an educated decision.

Pros

Though a Connecticut LLC may not be for everyone, there are certainly a lot of pros to consider for this business structure.

  • Low Taxes: A Connecticut LLC can benefit from the extremely low taxes the state places on small businesses. An LLC will only need to pay the state’s Business Entity Tax of $250 biennially.
  • Strong Economy: Connecticut LLCs will be able to benefit from a high degree of wealth with a far below-average poverty rate.
  • Close Proximity to Many Major Urban Centers: Particularly if you are located in one of Connecticut’s southern cities, such as Stamford, you are extremely close to major cities such as New York and Jersey City.
  • Enterprise Zones: With this program, small businesses can receive significant tax benefits. The Department of Economic and Community Development has assigned certain zones across Connecticut as “Enterprise Zones.” If you locate your business in one of these zones, it may be able to benefit from significant financial benefits for years to come. If your Connecticut LLC qualifies, it can receive a 100% tax credit for three years and then 70% for the following seven years. It can also qualify for low-interest loans as well.
  • Tax Exemptions: Connecticut offers a number of tax exemptions for small businesses, including relief on sales and use taxes for tangible property. Plus, the state offers an exemption for the purchase of manufacturing equipment. The state’s program offers a 100% exemption for a five-year period on newly installed manufacturing equipment. There are several other tax programs for new businesses in the state, so it is a good idea to ask a tax accountant what your business may qualify for.

Cons

Now it is time to consider the cons, and here are some of the biggest.

  • Reduced Privacy: Connecticut will require all LLC members and managers to be listed in the company’s Certificate of Formation
  • Receives Low Rankings: Many business ranking sources give Connecticut mid or low rankings for business formation primarily due to its relatively high living costs and infrastructure problems.
  • High Cost of Living: Generally, the state has a high cost of living well above average in the country. This will still depend on where in the state one lives, and this may not be an issue for those that intend to form in the state without living in it.

How to Form Your Connecticut LLC in Six Easy Steps

Now, hopefully, you are still with us and have decided that a Connecticut LLC is right for you. Luckily, forming your own Connecticut LLC is a simple, manageable process. With some work and a full understanding of the process, you will be done in no time. So, let’s get started.

Step 1: Choose a Name for Your Connecticut LLC

Choose-a-Right-Business-Name

Your first step in forming your Connecticut LLC will be to select a name for it. This is a crucial step for every business because this will be the first impression you make on all of your future customers. It is important to pick a name that will stand out, give customers an idea of what your business can do for them, and is unique from all other names that have been registered with the state.

Once you choose a name for your business, there are a few searches you will need to make before you can be sure you’ll be able to use your chosen name. To be sure that your name is truly unique, you can search for it on the Connecticut business name search tool.

Select keywords from your name and enter them into the search tool to ensure your name is distinct from those that have already been registered with the state. If it appears that the name you have selected is distinct, then you can likely use it, so now choose an LLC designator to place at the end of your name.

A designator will allow others to know that your business is an LLC, and you can choose from options such as “limited liability company,” “LLC,” or “L.L.C.” Also, it is important to remember that your name is not allowed to use designators for other business structures that could confuse others, such as corporation, Inc., or any others. Additionally, to use terms such as a bank, university, or certain other restricted words, you will generally need to file some additional paperwork and have individuals holding certain licenses be a part of your LLC.

  • Suitable Domain Name: It is a good idea to make sure that the name you choose will have a suitable domain name available if you ever choose to start a business website. Don’t underestimate the importance of this step, because even if you don’t choose to now, most businesses that take off will want to make one in time. Also, you may want to check social media as well to see if a suitable handle is available for your business. This may be particularly important for some businesses, so consider your needs before settling on a name.
  • Doing Business As (DBA): It is important to choose a name you think will last for the long haul. Changing your LLC’s name can involve a considerable burden of paperwork and rebranding. However, if you do need to change your LLC’s name for some reason or you want to sell another product or service under another name, there is an easy option. Filing for a DBA, also known as a trading name, is an easy way to keep your original name and legally operate under another. To do this, you simply need to file a “trade name certificate” with the town clerk where your business operates.
    You can learn how to file for DBA here.

Step 2: Choose a Registered Agent in CT

Appoint-Registered-Agent

All Connecticut LLCs must have a registered agent to receive service of process and other official documents and notices from the state. You can choose to be your own registered agent, or you could choose a friend, family member, or another LLC member. There are just a few requirements listed below.

  • They are required to sign a formation document.
  • The registered agent must have a physical address in Connecticut, not a P.O. Box.
  • The person must be available during all regular business hours.

Although there are very few restrictions on who can be your registered agent, there are a number of advantages to having a registered agent service. So, to help you decide if you would like a registered agent service to act as your registered agent, we will discuss some of these advantages.

  • Convenience: Having a registered agent service can be quite convenient. A registered agent needs to be available during all business hours, and this isn’t easy for businesses that operate outside of normal business hours. Also, if you travel a lot, it could be impossible to always be available during business hours. But with a registered agent service, you don’t have to worry about this; they will be available during all business hours to receive any official correspondence. So, you won’t have to worry about missing any important documents from the state.
  • Protect Your Privacy: Another good reason to hire a registered agent service is to preserve your privacy. If you choose to be your own registered agent, your address will be part of the public record. So people will be able to see your address, and you could easily find yourself getting unwanted sales calls. However, with a registered agent service, the address of the service will be listed on public records. This will allow you to keep your address private. It could also be convenient if you ever move because it will save you the trouble of having to change the registered agent’s address, which can require a lot of paperwork.
  • Preserve Your Business Reputation: If you choose to be your own registered agent, whether you use your home address or your business’s address, you risk having service of process notifications delivered to your address. This can be embarrassing in front of your friends, family, or customers. It can also hurt your business’s reputation to have this happen on your business premises. But if you have a registered agent service, the notice will be delivered to this service, and the service will inform you privately of the notification.
  • Less Worry: As a business owner, you are probably quite busy taking care of your business, and this can make it difficult to keep up with all of your mail. It’s easy to lose track of important mail when it gets mixed in with all of your other mail. However, this can be a real problem since many of the documents the state sends you will be time-sensitive. But a registered agent service will make sure you receive any important mail, and many services will alert you to any that need your attention. This could make it easier to stay in compliance with the state.
  • Helpful for Those Who Do Business in More Than One State: For LLCs that do business in more than one state, it is definitely convenient to have a registered agent service. LLC’s are required to register in each state they do business in, and you’re required to have a registered agent in each of these states, so it is convenient to have a registered agent service because they often have offices in each state. This means even if you are just planning on doing business in more than one state, it could make sense to have a registered agent service rather than changing your registered agent later.
  • Keeps Your Important Documents Together: It’s easy when you’re in a hurry to just stuff important papers into a nearby drawer or cupboard and then not be sure where you stored them. But with a registered agent service, you won’t have to worry about keeping your documents safe and organized. A registered agent service will store all of your documents for as long as you need them.

Step 3: File Your Connecticut LLC Certificate of Organization

Certificate-of-Organization-1

The next step you need to take is to file your Certificate of Organization. This is the step that actually forms your LLC. You will file this document with the Connecticut Secretary of State. The filing fee for this is $120. You can file your Certificate of Organization online, by mail, or in person. The quickest way to file is online at the  business.ct.gov website.

If you want to apply by mail, you can download the form and then fill it out and mail it to:

Connecticut Secretary of State.
Business Services Division
Connecticut Secretary of the State
P.O. Box 150470
Hartford, CT 06115


Step 4: Draft an Operating Agreement for Your Connecticut LLC

Operating-Agreement-02

Connecticut does not require an LLC to have an operating agreement, but you should still have one, especially if your LLC has more than one member. An operating agreement details the structure of your business as well as the rights and responsibilities of the members. Having this document can help avoid arguments between members, which can help your LLC run more smoothly. There are no specific requirements for what you must include in your operating agreement, but we list some important details that would be good to include below.

  • Percentage of Ownership: In most LLCs, ownership is divided according to how much of the initial investment the member provided. However, you could choose to divide ownership in a different way if you want. It’s possible you may want to give a larger percentage of the LLC to someone because they have more experience, or you’re planning on having them do a larger share of the work. If you do decide to base ownership percentages on something other than the member’s share of the investment in the business, make sure to include this in the operating agreement
  • Member- managed or Manager-managed: You can choose to have your LLC be member-managed or manager-managed. Member-management is the more common option. With member-management, all of the members of the LLC run the business. They run the day-to-day affairs as well as making any decisions for the LLC. However, the members can split up the duties as they please.

If the members of an LLC want, they can choose a manager to run the business for them. This option is called manager-management. It is more common with larger LLCs. With this type of management, the manager runs the day-to-day business as well as making decisions for the business. The owners serve in an advisory role. Although if the members of the LLC want, they may reserve some decisions for themselves by including them in the operating agreement.

  • Profits and Losses: Generally, profits and losses are allocated according to a member’s percentage of ownership. However, there may be cases when you want to distribute profits and losses in another way. If you choose to do this, you will want to include this in the operating agreement. It’s also important to remember that any profits need to be recorded on the members’ tax returns even if they are not distributed.
  • Member Withdrawl: It’s possible that sometime during your business, one of the members of your LLC will want to withdraw. This could cause some arguments unless you’re prepared ahead of time. So you want to include what will happen in this situation in your operating agreement. You should specify whether the departing member will be required to offer their shares to other members before selling them to an outsider. You also want to include if you are going to have any requirements for anyone that the shares will be sold to. You might also want to specify if the member will be required to give any notice of their exit.
  • Dissolution: Since you’re just starting your business, you probably haven’t taken the time to think about ending it. But while you’re drafting your operating agreement, you should take the time to include a couple of details about what will happen if you decide to end your LLC. What sort of vote will it take to dissolve the LLC, such as a majority, supermajority,  or unanimous vote? You should also include how any assets that are left over after debts are paid will be divided among the members. Another thing you might want to include in your operating agreement is whether any of the members will be allowed to carry on with the idea of the business after the LLC is dissolved. Including these things in your operating agreement could decrease arguments as well as the possibility of a lawsuit.

Step 5: Obtain an Employer Identification Number (EIN) in CT

Obtain-EIN

You will probably want to get an Employer Identification Number for your business. This number is a nine-digit number that is used by the IRS to identify your business for tax purposes. It is also often called a federal tax identification number. This number is similar to a Social Security Number. Your business will be required to have one of these numbers if your LLC has more than two members or intends to hire employees. You will need this number when you file taxes or if you want to open a business bank account.

An EIN is free, and you can easily obtain your EIN from the IRS. Just apply by mail, fax, online, or by phone if you are an international applicant. Make sure you have a Taxpayer Identification Number. A Social Security Number will work fine.

You can apply by mail or fax by filling out Form SS-4 and sending it to:

Internal Revenue Service
Attn:  EIN Operation
Cincinnati, OH 45999

It will take about four weeks to process. If you want to apply by fax, fax the form to (855) 641-6935. It should take four business days to receive a fax back.

You’ll want to apply online at the IRS website if you want the fastest service. If you apply online, you will get your EIN as soon as you fill out and submit the application. Just make sure you finish the application in one session. It will not save; so, you won’t be able to start it then finish it later. If you are an international applicant, you have the option of applying by phone. You can apply on weekdays from 6 a.m. to 11 p.m.  Eastern Time.


Step 6: Obtain a Business Bank Account in Connecticut

Open-a-Business-Bank-Account

Likely one of the main reasons you formed an LLC in Connecticut is to protect your personal assets. However, in order to make sure your personal assets stay secure, you need to make sure you keep your personal assets separate from the LLC’s assets. This will help ensure that any court will see that the LLC is its own separate entity. If you don’t keep your business assets separate from any personal assets and you get sued, the court could decide to remove your business’s limited liability. Therefore it’s essential you keep your business finances separate.

One of the best ways to keep your business finances separate is to obtain a business bank account. This will help keep your business transactions totally separate from your personal transactions and ensure that your LLC is seen as a separate entity.

There are some other advantages to a business bank account as well. One advantage is it can make your bookkeeping and tax preparation easier. It can do this by keeping your business transactions separate. This way, you don’t have to hunt through your personal bank account and separate all the business transactions from the personal transactions. This also makes it easier around tax time. Your business transactions will already be separate, and you’ll be less likely to miss any deductions as well.

Another advantage of a business bank account is the opportunity to form a relationship with a bank. This can come in handy if you ever want a loan or a line of credit for your business. Also, with a business bank account, you will be able to accept credit cards which can increase your business.

Necessary Documents

There are a few documents the bank is likely to require when you go to open your business bank account. So we will discuss these, and you will probably want to make sure you have them on hand when you go to open your account.

  • Certificate of Organization: Your bank will want to see a copy of these business formation documents. These documents will let your bank know a bit about the structure of your business, who is managing it, and how you will be operating it.
  • Employer Identification Number (EIN):  As we stated earlier, an EIN is a nine-digit number similar to a Social Security Number that the IRS uses to identify your business for tax purposes. So the bank will want this number to help identify your business.
  • Doing Business As (DBA) Certificate:  Some businesses operate under a name other than their legal business name; this name is called a DBA or doing business as name. If your business is using a DBA, you will need to supply the bank with doing business as certificate.
  • Operating Agreement: If your business has more than one member, the bank may want a copy of your business’s operating agreement.
  • Identification: Your bank will require identification before allowing you to open an account. A driver’s license, passport, or state ID should work.
  • Business Licenses: If the area your business is operating in requires any business licenses, your bank will probably want a copy of these to prove that your business meets the necessary legal requirements to operate.

Additional Steps for Growing and Maintaining Your Connecticut LLC

Now that you have finished forming your Connecticut LLC, it is time to enjoy running your business. Here are a few tips to help you both grow and maintain your business from here.

1. Business Licenses and Permits

Obtain-the-Necessary-Licenses-and-Permits

In order to maintain your business, you need to get the licenses and permits necessary to operate your business. You can find out the licenses and permits you need by searching on the Connecticut Department of Consumer Protection website. Just look in the business section to see which ones you need; some business licenses and permits are based on location, whereas others may be based on the industry you are in. It’s important to obtain these permits to avoid any penalties.


2. Business Insurance for Your CT LLC

Get-Business-Insurance

Another important part of maintaining your business is obtaining business insurance. An LLC will protect your personal assets from being taken to satisfy your business’s debts, but by having general liability insurance, if your business is sued, you can help protect your business assets as well. You’ll also want liability insurance for the members of your LLC as well since if they are sued due to negligence or wrongdoing, their personal assets could be at risk.

If you provide a professional service, you may need to acquire professional liability insurance. This insurance will protect you in case you are sued for negligence or mistakes in the course of your work.

If you have employees, you will probably be required to purchase Worker’s Compensation Insurance. This insurance will cover your workers in case of illness, injury, or death on the job.


3. Start a Business Website (optional)

Start-a-Business-Website

Every business should have a business website even if they don’t conduct their business online. It’s important to have a website to allow people to learn about your product even if they need to purchase it at your brick-and-mortar store. If people look for your business’s website online and don’t find it, they can easily find a similar business’s website.

But, you should have no trouble building a website. There are many tools online to help you build your website, and you don’t need any past experience to use them. It shouldn’t even take very long to get your business website up and running.               


Form a Connecticut LLC With Professional Help Today

Forming your Connecticut LLC is most definitely worth the time and effort. However, many entrepreneurs struggle to find enough time to handle all the aspects of getting their business started. Luckily, there are a number of services out there that can help do the hard work of forming an LLC for you. Here are some of the best.

#1: Start a Connecticut LLC with ZenBusiness

ZenBusiness is one of the newer LLC formation services, but it is already one of the most popular. It has very reasonable prices and offers great features. They include a free operating agreement with all of their packages, and they will file your annual report for you if you want. Additionally, they will give you 25% off of registered agent service with any package you purchase.

$49

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Rating: 4.8/5
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Form an LLC today with ZenBusiness for only $49. They Have 98% customer satisfaction rating and over 4500+ verified reviews.


#2: Start a Connecticut LLC with Incfile

Incfile is a very affordable LLC formation service that provides excellent features as well. Incfile provides a year of free registered agent service and lifetime company alerts with all of their packages. These alerts will keep you informed of upcoming filing requirements with the state, so your LLC can stay in good standing with the state. The best thing about Incfile is their free package; all you have to pay is the state fee.

Use our special promo and get your LLC started today with IncFile! Hassle-free, cheap and quick.


Final Thoughts

A Connecticut LLC may be a great choice for getting your business off the ground. With liability protection, reduced tax rates, and an ample supply of business funding, this business structure has a lot to offer. So, why not get started forming your Connecticut LLC right now? You can do it yourself with the helo of our guide; or just use a professional service suggest above. Good luck with your new business endeavors!

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About the Author
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Founder & author

Ian Broderick is an avid author and owner of LLCGuys.com. He's been involved with the LLC formation field for over 4 years. On top of that, he has worked in several well-known LLC formation service providers. Now he decided to share his knowledge and advice with everybody. Since there are a lot of questions and concerns surrounding this field - his aim is to make LLCGuys a top-notch information provider in regards to LLC creation, service reviews and etc..

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