Follow our free guide to form an LLC in Connecticut
- Pros and Cons of Forming an LLC in Connecticut
- Starting Your Connecticut LLC
- Maintaining Your Connecticut LLC
- Additional Connecticut Resources
To ease the process of forming an LLC in Connecticut, follow this comprehensive guide for pros, cons, how to start, and how to maintain your Connecticut LLC.
Pros and Cons of Forming an LLC in Connecticut
Low Taxes for LLCs
Connecticut does not burden small businesses with high tax rates. LLCs are only required to pay a $250 Business Entity Tax every two years.
Close Proximity to NYC Metro Area
Connecticut’s southern cities (Greenwich, Stamford, New Canaan) are within a few hours’ drive of New York City. Recent positive activity in Stamford’s financial district has earned the city the title of “Little Manhattan.”
All Owners Disclosed in Original Filing
Connecticut state law requires that all members/manager of an LLC be listed in the Certificate of Organization.
Low Ranking for Business
Based on CNBC’s annual “Best States for Business” report, Connecticut does not quite make the cut — high cost of living and poor infrastructure were among the categories that put the state at #37 on the list.
High Cost of Living
Considered one of the more expensive states in the U.S., Connecticut tops the national average by almost 20%, especially in the area of housing — the median cost of homes in Connecticut is $20,000 higher than the average US cost.
Cost of Doing Business
- $120 Filing Fee / $20 Annual Report
- $250 Business Entity Tax (biennial)
Starting Your Connecticut LLC
Starting an LLC may not appear overly simple, but you will see that actually forming a business can be done in a few steps. The process is not that difficult when you have help. Here are the steps needed to ensure that your Connecticut LLC comes together correctly:
- Step 1: Name your LLC
- Step 2: Establish Ownership of your LLC
- Step 3: Decide on a Registered Agent
- Step 4: File the Certificate of Organization
- Step 5: Create your Operating Agreement
- Step 6: Fill out the paperwork for an EIN
Step 1: Name Your Connecticut LLC
Finding a name for your new business is an important first step in forming your Connecticut LLC. As you narrow down the list of possible company names, there are a few guidelines to keep in mind:
- The official name of your business must end with: Limited Liability Company, Limited Company, LLC, or L.L.C
- Your business name cannot be intentionally misleading to consumers
- The name of your new LLC must not be similar to another organization’s name/trademark
Restrictions exist regarding the name of your LLC, depending on the state where you are starting your business.
A few examples include:
- “Lottery” and “Bank” are ineligible for use (any state)
- Terms that represent educational or Veterans’ organizations are restricted
- Terms related to the Armed Forces or civil servants (police, EMT, fire)
LLC business names associated with government and/or financial entities are not always restricted - it depends on the state. Additional paperwork may be required.
In addition to choosing a name for your LLC, creating an online presence is equally important in the current culture. You can easily check domain name availability at a number of online web services sites.
Step 2: Establish Ownership
The owners of an LLC are not called owners — they are instead referred to either as members or managers. The difference depends on the management structure of the business.
LLCs generally have two management structures:
- Member-managed (ownership of business is divided among the members and all parties receive portions of the profits)
- Manager-managed (the appointed manager is the main operator and the members are passive investors who are not actively involved in the daily business operations)
After you have selected a name for your business, you then need to choose a management structure and designate the members of the LLC. The rules concerning LLC ownership in Connecticut include:
Required Number of Members
Connecticut LLCs must have at least one member or manager in order to form a business.
Member Disclosure Requirements
All members of the LLC must be named in the Certificate of Organization
LLC members in Connecticut may be of any age.
There are no residency restrictions imposed on LLC members in Connecticut.
Step 3: Find a Registered Agent in Connecticut
The registered agent is necessary for all LLCs formed in Connecticut. Your business cannot be official without filling this position.
What is a registered agent?
A registered agent is a person or business who is authorized to accept official government notices (including the Secretary of State) and service of process notices on behalf of the LLC.
Why do you need a registered agent?
Whenever you start an LLC in Connecticut, the law requires you to appoint a registered agent so that the state government has a consistent contact person for your business. The agent is expected to be available during standard business hours.
Who can be a registered agent in Connecticut?
The requirements to be a registered agent are as follows:
- A resident with a physical address in Connecticut
- An LLC or corporation that is licensed to conduct business in Connecticut
Please Note: It is also possible for you to be your own registered agent as long as you use a physical address.
Why you may not want to be your own registered agent
Because the registered agent’s name and address are a matter of public record, LLC business owners who choose to be their own registered agent risk compromising their personal information.
Tip: Avoid the hassles that come with being your own registered agent and choose Swyft Filings to fill the registered agent needs for small businesses in Connecticut. Find more information here.
Step 4: File the Certificate of Organization
Connecticut LLCs become official and legal when the Certificate of Organization (also known as Articles of Organization) is filed with the Secretary of State. This is the most necessary and required step in forming an LLC in Connecticut.
This vital document includes the following:
- The official name of the LLC
- The LLC’s physical location
- The name(s) of all of the LLC’s members
- The name and address of the registered agent
- The statement of purpose
- The chosen management structure
Additional Connecticut Filing Requirements—Professional Service Businesses
Connecticut also allows professional service businesses to form an LLC. The following professions may choose to form an LLC:
- Physicians (general, surgeon, podiatrist, dentist, optometrist, chiropractor, physical therapist)
- Professional Counselors and Psychologists
- Architects and Engineers
A few points to consider:
- All members of the professional LLC must be licensed in the profession of the business.
- The professional LLC is only allowed to provide services for which the business was formed.
- The members are still subject to whichever licensing boards govern the LLC’s profession.
Step 5: Create an LLC Operating Agreement
While an Operating Agreement is not required to form an LLC in Connecticut, this document is still considered a vital necessity for any successful business because it adds structure to your company and projects a sense of professionalism.
What is an LLC Operating Agreement?
The LLC Operating Agreement is an in-house legal document that defines the rights and responsibilities of each person involved in the business and lays out the details involving how the business will operate.
Why do I need an LLC Operating Agreement?
Because the LLC Operating Agreement defines the roles of the business’s members and provides direction for daily operations, the document ensures stability and structure to the LLC and reduces future disputes.
What goes into an LLC Operating Agreement?
While there is not a set rule of what must be included in your LLC operating Agreement, most documents include the following the information:
- Designation of the members/managers
- Initial capital contributions of the members
- Voting designations and percentages
- Member transfer/addition rules and restrictions
- Distribution of profits
Tip: Get a customized LLC Operating Agreement for your small business with Swyft Filings. Add structure to your LLC now.
Step 6: Obtain an EIN
The state of Connecticut requires an EIN for any business that has/plans to have employees. Additionally, most banks and financial institutions require the EIN in order to open any accounts.
What is an EIN?
The EIN (Employer Identification Number) is also known as a Federal Tax ID and is a nine-digit number that is assigned to your business by the Internal Revenue Service (IRS). The EIN identifies your business with the government much like a personal Social Security number.
What business entities need an EIN?
The types of business entities that need an EIN include:
- An LLC with employees (even if owned by one person)
- An LLC with more than one member
- A partnership (LLC or C-corp)
Please Note: A sole proprietorship is the only business entity that is not required to have an EIN.
Why is an EIN necessary?
The more common reasons you would need an EIN are:
- To hire employees
- To open a bank account in the U.S.
- To file your company’s taxes
- To pay independent contractors
Please Note: If you collect revenue of any kind through a business entity, you will need an EIN.
Swyft Filings offers EIN services for small businesses in Connecticut. Find more information here.
Maintaining Your Connecticut LLC
Now that you have finished the first part of setting up your Connecticut LLC, it is time to move on to the next part that focuses on getting your business ready for customers.
The next few steps are:
- Step 1: Register for Taxes in Connecticut
- Step 2: Apply for Needed Permits and Licenses
- Step 3: File the Annual Report for your LLC
- Step 4: Request a Certificate of Good Standing
Step 1: Register for Connecticut State Taxes
The taxes for LLCs in Connecticut may include varying payments, depending on the type of business. All LLCs must pay the Business Entity Tax (BET):
Due Date: April 15th following the close of the taxation period (odd year)
Taxation Period: Two-year cycles - the current period is 1/2017 to 12/21/18
Other taxes your LLC may need to pay include:
- Sales and Use Tax at 6.35% (see below)
- Employee Withholding Tax
- Unemployment Tax
Regardless of industry, all LLC members must pay state and federal income taxes on their earnings. The state income tax rate for Connecticut ranges from 5% to 6.99%
Taxable Income Range (Single)
$10,000 - $49,999
$50,000 - $99,999
$100,000 - $199,999
$200,000 - $249,999
$250,000 - $499,999
$500,000 and up
Step 2: Obtain Business Licenses and Permits
The licenses and permits required for an LLC in Connecticut can vary, depending on a number of variables:
- Location (city and county)
- Type of Business
Certain LLC businesses in Connecticut will need a Sales and Use Tax Permit:
- Any business selling physical goods
- Any business that sells taxable services
- Hotels, motels, B&Bs, and other lodging establishments
Please Note: Failure to obtain a sales tax permit can result in a $500 fine.
Tip: If you would like to see more in-depth information on licenses and permits, please feel free to visit the content in our learning library that covers business licenses and permits.
Step 3: File an Annual Report
All Connecticut LLCs must file an annual report with the Department of State. The purpose of the annual report is to keep the business’s information and “good standing” status updated with the state.
Due Date: Anniversary month that LLC was formed
Implications of Late Filings: LLC status changed to “Not in Good Standing”
Please Note: Even though Connecticut does not charge a late fee for a delinquent annual report, the downgraded status can negatively impact your company’s ability to conduct business in the state.
Swyft Filings helps you stay compliant by providing stress-free solutions. File your annual report with us today.
Step 4: Obtain a Certificate of Good Standing
There is one final step in making sure your Connecticut LLC is ready for business, there is still one last step — getting a Certificate of Good Standing.
The majority of financial institutions and businesses may require proof that your new business is fully compliant with the state. Obtaining a Certificate of Good Standing provides your LLC with a “seal of approval” from the Secretary of State.
What is a Certificate of Good Standing?
The Certificate of Good Standing is an official notification from the government agency that confirms your entity has been properly filed and is still in compliance.
Why should I obtain a Certificate of Good Standing?
In the course of conducting business, there will be times when you will need to prove that your business is properly filed and fully compliant with the state. Many banks and businesses will request a Certificate of Good Standing as part of the due diligence process (especially during major transactions).
For the most part, any time you need to show your business is properly filed and fully compliant, you will likely need to present a Certificate of Good Standing.
Swyft Filings can create a Certificate of Good Standing for your Connecticut LLC. Click here for more information.