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Starting a limited liability company (LLC) in Connecticut could provide business owners with a few benefits. That includes the potential to protect the business owner’s personal assets from business liabilities. Connecticut LLCs also benefit from a faster and simpler process for filing tax returns. The state makes the process direct, and as long as the proper steps are followed, it can be completed quickly.
Connecticut LLCs may benefit from a variety of business incentives offered to many organizations. That may include business loans and tax incentives.
In this guide we’ll take you through everything you need to know to form your LLC in Connecticut.
What does it take to create an LLC in Connecticut? There are 6 steps:
To help you start your LLC in Connecticut, we’ll go through each step in greater detail:
Your business’s name is a big part of your brand identity. The state has a few requirements for creating your name.
One of the requirements for all companies forming an LLC is that the words “Limited Liability Company” or a form of it must be included in the name in some way. Several options exist, including:
As you work to name your business, keep in mind that it has to be unique. That means that no other business in the state can have the same name as your own. As a part of the process of setting up your LLC, you will need to check the availability of names. This is done on the Connecticut Secretary of State website. There, you can use the Connecticut Business Registry Search to look for companies with a name that is the same as or very close to the one you hope to register. The search provides instant access to similar company names. You can also use the tool to help you find company names that contain a specific word or phrase.
The state also makes it a requirement that your business name does not include any terminology that may allow people to confuse your business with a government entity. For example, you cannot use terms like “Gov” or “State Department” in your business name. There may be other restricted words as well, such as “bank” or “university” as well as “attorney.”
Once you have all of that information in hand and select your official LLC name, you can then complete the Application for Reservation of Name. You can do this in several ways. First, you can download and print the application form. If you do this, you can then mail it to:
Commercial Recording Division
Connecticut Secretary of the State
P.O. Box 150470
Hartford, CT 06115-0470
It is also possible to call the office with questions at 860-509-6003. It may also be possible to deliver the form in person at:
Commercial Recording Division
Connecticut Secretary of the State
30 Trinity Street
Hartford, CT 06106
Yet another option is to sign up for an account at the Online Business Services website from the Secretary of the State. This website allows you to create an account and then complete this (and other forms) online.
There is a $60 filing fee to reserve your name.
Some companies may not want to use their legally registered LLC name in the routine operations of their business. If you want to use another name in your everyday course of business, you need to let the state know about that. To do that, you will register a trade name or Doing Business As (DBA) name. This is not a requirement, though many companies want to take this step when their legal name and trade name do not match.
In Connecticut, the process of registering a DBA is done at the city level with a town clerk. Do this in the city where your LLC resides. Each of the town clerks in the state has their own documentation for completing this process. However, most are easily accessible over the phone, by email, or by visiting them directly. Here is a list of the Connecticut Town Clerks based on location.
The next part of this step involves registering your business name for trademarking. The trademark provides you with exclusive rights to your business name not just in the state but on the national level. It is not always necessary, but many businesses benefit from taking this step because it can help with branding and, in some ways, many help provide you with a stronger legal footing when problems come up later.
To do this in Connecticut, you will need to complete business trademarking forms. Fill out the forms associated with your business for the Trade and Service Mark. One nice benefit is that this website has a chat box that allows you to get help with the process.
It is also possible to use the Trademark Electronic Search System (TESS) with the U.S. Patent and Trademark Office to search for trademarks. This allows you to ensure your trademark is original. You can use the database there to compare trademarks. Once you choose your trademark and ensure it is available, you then need to download the forms on the website, complete them, and mail them in as directed. There is a $30 fee for any online documents (all documents can be submitted online). You can drop them off in person or by mail, but the cost is then $50.
The articles of organization must be filed with the Connecticut Secretary of State as a part of the registration of the LLC. This includes a list of information about the company, including:
This information is included on the Certificate of Organization form. Once completed, this form is then mailed to:
Business Services Division
Connecticut Secretary of the State
P.O. Box 150470
Hartford, CT 06115-0470
It can also be submitted through the Connecticut Business Services website (the same portal that is created in the registration process.)
The articles of organization aim to provide as much information about the company as possible.
Filing fees exist for several of the steps in creating an LLC in Connecticut, including:
Other fees may apply.
Businesses forming an LLC must complete all forms listed above to complete their registration. The required information includes, but is not limited to:
To file the necessary paperwork to become an LLC, companies must complete the downloadable forms listed above, fill them out, and send them to the specific locations listed above.
It is also possible to file most documents digitally through the Secretary of State’s Online Business Services portal. To access this portal, businesses must first create an account on the site (there is no charge to do so). They can then locate the necessary forms, fill them out digitally, and submit them to the state for review. The website provides step-by-step information for doing this when you use the Register Your Business link.
The state of Connecticut requires businesses to identify a registered agent. This is a third party who agrees to register in the state of the business. They must be able and willing to receive service of process notices and other correspondence coming from the state or related organizations to the LLC. The state allows for an LLC to appoint someone that fits the following requirements:
The registered agent is responsible for being available during normal business hours to receive packages, mail, and service of process.
For some companies, the best route is to utilize a third party to complete this duty for you. You can use our services to do so, ensuring that there is always someone available to meet this requirement.
An operating agreement provides a set of rules or clear documentation on how the company is to be managed. It may help to eliminate internal disputes among the members of the LLC. It also helps to establish the goal of the LLC so that each member is working toward the same one. Every LLC should consider the value of an operating agreement.
An operating agreement is not a requirement under Connecticut law. The Connecticut Uniform Limited Liability Company Act (CULLCA) was put in place as law in 2017 as a way to cover all LLC companies in the state that do not have their own operating agreements.
However, there are a number of reasons why a company should have its own operating agreement. This document provides information on the internal operations of the company. In Connecticut, if a business does not have its own operating agreement and the owner passes away, the CULLCA rules apply, which means the membership interest of the owner in the LLC becomes economic interest. That means the membership interest is simply a financial interest, and all decision-making rights are eliminated. As a result of this, heirs may be unable to participate in the operation of the company. This is one of several reasons why LLCs should form their own.
An Employer Identification Number (EIN) is a requirement for all businesses operating in the state. This is a requirement of the Internal Revenue Service (IRS) and will be used for identification purposes in the state (in some cases) and with the IRS for tax filing purposes. An EIN operates much like a social security number, but it is for the business rather than for your own personal use.
Having an EIN is beneficial for many reasons as well. It allows a business to open necessary business bank accounts. It can also help minimize liability and risk associated with personal assets (since the EIN does not connect to your personal identification).
EINs are often beneficial because they help make your business more credible and allow other organizations, including vendors, to recognize the business. All companies with employees need an EIN in order to file taxes on behalf of those individuals. It also is necessary for organizations issuing a 1099 on behalf of independent contractors.
Obtaining an EIN is something our company can do for you if you would like us to handle the process. It is also possible to complete the process on your own. There is no charge to it.
To obtain an EIN on your own, visit the IRS website and complete the steps listed there. You will fill out Form SS-4. The process also requires you to answer a few specific questions about the business. It then requires that the business owner or other principal applying for the EIN on behalf of the business provide their Social Security number. It’s also necessary to provide an address for the principal completing the process or a registered agent, along with the owner’s address if different.
The EIN is then issued immediately. Store this information carefully. You may need it later to open a business checking account, credit cards, or loans, as well as to issue 1099s to members or independent contractors and to file federal tax returns.
All businesses operating in the state must comply with very specific tax rules. It is often best to speak to an accountant to learn about the specific tax requirements for your business, as some industries may have different fees and costs to pay than others. Some of the areas that may apply to you include the following.
Under state and federal law, all businesses must pay state and federal taxes on the income generated by the business. In an LLC, payments made to members and the principal of the company are considered business income. That means that each of these disbursements is subject to income taxes at the federal and state level.
Hiring a tax professional to help with the management of your tax obligations is beneficial as both state, and federal tax laws change annually. They may be able to help you complete your taxes and could help you reduce tax obligations depending on the type of business, expenses, and other costs.
Whether you complete your taxes on your own or have a professional complete them for you, all documentation from your taxes must be kept for 7 years.
Also, note that LLC members must also complete their personal taxes. This is done separately from business tax filings. Some deductions and credits may apply to members of the LLC, but these, too, can differ each year. A tax professional can provide assistance in this area.
Under Connecticut law, the corporate income tax is a flat rate of 7.5 percent. It is possible to gain more information about income tax laws in the state by visiting the Department of Revenue Services website.
Some businesses in the state must charge sales tax. The general rate of sales tax in the state is 6.35 percent. This is imposed on most tangible personal property sales. You can find more information about sales tax requirements at Section 12-407 of the Connecticut General Statutes.
State law requires that any business that is selling tangible personal property for most uses, including storage, use, consumption, or selling taxable services, must apply sales tax to those purchases. To do this, the business must register with the Department of Revenue Services in the state to obtain a Sales and Use Tax Permit. To do so, complete the Registration Application on the website. This is also where businesses will submit tax returns and pay for any type of tax requirements in the state.
In Connecticut, there is no county or municipal sales tax.
Not complying with all sales tax requirements could create a financial strain for the business. It may also lead to fees and legal action taken against the company.
Individual members of the LLC may be obligated to pay self-employment taxes. This is a requirement at the federal tax level. Members of the LLC must also pay related fees for Medicare and Social Security. At the federal level, the self-employment tax rate is 15.3 percent. The federal government requires that businesses make quarterly payments of these taxes rather than one payment at the end of the year. Any time a disbursement from the LLCs income occurs to a member, these taxes are applied. Submit estimated federal taxes using Form 1040-ES (done by mail, over the phone, or using the IRS2Go app).
LLC members do not need to file self-employment taxes with the state of Connecticut directly. However, the state does require that businesses submit estimated state taxes quarterly. This can be done through the Department of Revenue Services website.
Any LLC that has employees needs to pay payroll taxes. Withholding is the amount of money the employer holds back from the employee’s paycheck. This includes federal taxes but also state income taxes for that employee. The employer needs to do this if the employee lives in the state or is performing services within the state.
The employer is required to withhold the appropriate funds from the employee’s wages, submit those funds to the Department of Revenue Services, and issue a W-2 statement that indicates the state (and other withholdings) each year.
To establish payment for payroll taxes in Connecticut and file withholding taxes, do so online using myconneCT, a payment portal from the revenue department. The website also provides more information about how to file them and when they are due.
The business should set up a withholding account for the deposit of these funds until they are paid. Noncompliance with these rules may require fines and penalties issued at the state and federal levels.
The State of Connecticut requires businesses to file an annual report of their LLC. Notifications requiring these are sent to the company’s mailing address. It is possible to file the annual report on the Business Services portal website. Log into your account and follow the directions included on the website. This is due on the anniversary month of the formation of the LLC.
The Business Entity Tax also applies in Connecticut. This is a $250 fee paid every two years to the state. It is called the Pass-Through Entity Tax and is filed through Form CT-1065/CT-1120SI, completed through the Department of Revenue Services.
Many LLCs also need to pay state unemployment insurance taxes. This is done through the Department of Labor. To pay these, businesses need to register at the website or download and mail the appropriate form: UCT1A, Employer Status Report for Unemployment Compensation. Every quarter, the business needs to report wages and pay applicable UI taxes.
State and federal taxes for LLCs may depend on the structure of the LLC itself. This is another reason why it is important to work with a tax professional to ensure that all taxes are paid properly and according to the specifics as they relate to your business.
Now that you’ve set up your LLC, it’s time to start organizing your business. Here are some aspects of this process:
To help separate your business and personal income and expenses, open a separate business account. All income paid to the business should be placed into business accounts. When possible, pay all fees and expenses out of the same account to easily manage the business. Payments such as taxes and filing fees required for operating your business should be paid from this account to streamline the process.
Never use your business account for any personal transactions, even withdrawals of cash. Instead, a formal disbursement from the account is paid to the member. This must be documented as it will be needed later to document for tax purposes. The disbursements are then reported through 1099s.
Each year, you must complete an annual report (as noted above). You will need to submit a fee associated with your LLC during that process. This is done through the Business Services online portal. Fees range based on the structure of the LLC but are typically $80.
A big part of establishing an LLC is ensuring you are separating personal and business income and expenses. It is important to do that on all levels.
Hiring a legal firm is one of the best ways to do this. It helps to ensure that your business meets all compliance requirements at the state and federal levels. You can also choose an accountant to help with this process. These professionals are able to help you determine the proper steps to establishing the finances for your business.
The benefit of hiring a professional is twofold. First, it ensures you meet all financial compliance rules in the state. Second, these professionals could help you reduce tax obligations through available incentives, deductions, and credits. A proper financial structure may also help minimize the risk of fees paid out.
The state of Connecticut has various rules on business licensing and permits, depending on the industry. It is the responsibility of the business itself to know what types of business licenses and permits apply to their operation. That can make it confusing. However, your legal team can offer some insight into this for you, guiding you in completing the necessary permitting based on the type of operation you are running.
To determine what these are, use the Department of Consumer Protection website tool. It allows companies to determine what licensing requirements fit their operation and allows for the direct application for those licenses as well.
Keep in mind that most business permitting and licensing happens at the city level (usually through the town clerks). That means companies need to request additional information at the local level based on their operations. Many communities have specific limitations or restrictions on some types of businesses or how they operate.
Also, consider the importance of insurance. Business insurance aims to help organizations cover risks commonly associated with operating a business. The business owner is responsible for selecting appropriate types of insurance and the amount of coverage they need. Working with an insurance agent who understands your business industry and risks is one way to do that. All companies in the state that have employees also need to meet the worker’s compensation rules based on their industry and business size.
This portion of our website is for informational purposes only. Tailor Brands is not a law firm, and none of the information on this website constitutes or is intended to convey legal advice. All statements, opinions, recommendations, and conclusions are solely the expression of the author and provided on an as-is basis. Accordingly, Tailor Brands is not responsible for the information and/or its accuracy or completeness.