The first step in starting a business in Connecticut is having a good business idea. Maybe you already have an idea picked out, or maybe you are still deciding on one. Regardless, you can check out our library of business ideas to get detailed industry information on over 300 types of businesses, along with trends, costs to start, tips, and lots more.

If you are looking for some ideas of popular small businesses to start in Connecticut, taking into consideration the state’s demographics, local consumer preferences, and economic climate:

Specialty food and beverage stores: Capitalize on the growing interest in organic, locally-sourced, and artisanal products by opening a gourmet grocery store, bakery, or specialty coffee shop.

Home improvement and repair services: With the state’s historic homes and changing seasons, there is a steady demand for services such as landscaping, interior design, and general contracting.

Health and wellness centers: Establish a yoga studio, fitness center, or wellness spa to cater to the health-conscious population seeking to maintain a balanced lifestyle.

E-commerce business: Leverage Connecticut’s educated workforce and strategic location to start an online retail store, offering anything from apparel to niche products, with easy access to major shipping routes and distribution networks.

Eco-friendly and sustainable products store: Open a store focused on selling environmentally-friendly products, promoting sustainability and catering to a growing interest in green living.

Pet care services: Offer pet-sitting, dog walking, or pet grooming services to accommodate the state’s many pet owners who seek reliable care for their furry companions.

Tech services and consulting: Take advantage of Connecticut’s skilled workforce by providing IT support, web development, or digital marketing services to businesses in need of tech expertise.

Craft brewery or winery: Establish a local brewery or winery to contribute to the state’s growing craft beverage scene, offering unique and locally-produced drinks to residents and tourists alike.

Elder care services: Cater to Connecticut’s aging population by providing non-medical home care, senior transportation services, or adult day care centers.

Having a comprehensive business plan is essential for success when starting a new business in Connecticut. While the business plan is important for obtaining funding, a business plan also helps entrepreneurs set goals, establish a marketing plan, determine employee needs, and figure look at the feasibility of their business.

If you haven’t written a business plan before, check out our guide and template so you can get started.

Forming a business structure is a critical step when starting a business in Connecticut, as it determines the legal and tax framework under which your company will operate. Choosing the right business structure will impact your personal liability, tax obligations, and overall management.

The most common business structures are Sole Proprietorship, General Partnership, Limited Liability Company (LLC), and Corporation. Each structure has its own set of advantages and drawbacks in terms of liability protection, tax treatment, and administrative requirements. Research these options and consult with an attorney or accountant if necessary to determine the best structure for your specific needs and circumstances.

A Sole Proprietorship is an individual that decides to go into business. This is the easiest and least expensive of the four entities to set up, as there is no state filing. The ease of startup is a big selling point; however, a major downside to the sole proprietorship is that the owner is personally responsible for the company’s debts and actions. If the business is sued, the owner’s personal assets are potentially at risk.

As a sole proprietorship (and partnership too) operating under a Trade Name (sometimes referred to as a fictitious business name or DBA), a Trade Name will need to be registered with the Town Clerk’s Office where your business is located.

Related: What is a sole proprietorship?

General Partnerships consist of two or more people conducting a business together. Like the sole proprietorship, there is no formal state filing. Also, like the sole proprietorship, the partnership has unlimited liability. If the partnership were to be sued, the partner’s personal assets would be equally at risk.

Related: What is a partnership?

A Corporation is a business structure that is a separate entity from the individual. While corporations are more expensive and difficult to form than sole proprietorships and partnerships, the major advantage is that the corporation provides personal asset protection for the owners, should the corporation be sued. The downside is the compliance requirements and administrative burdens of having a board of directors, annual meetings for directors and shareholders, taking minutes at the meetings, issuing stock certificates, and more.

Related: How to form a Connecticut Corporation

The Limited Liability Company (LLC) is a popular business entity choice because it provides the liability protection of a corporation with the sole proprietorship’s ease of operation. The Limited Liability Company does not have all of the burdens of the corporation and has the greatest tax flexibility of the four entities.

Related: How to form a Connecticut LLC

Depending on the nature of your business, you may need to acquire specific licenses or permits from federal, state, or local authorities. A few common registrations include:

General Business Licenses: There is no general state of Connecticut business license; however, many cities require a business license to operate.

Employer Identification Number: An Employer Identification Number (EIN) is a unique nine-digit number issued by the Internal Revenue Service (IRS) to identify a business entity. In Connecticut, an EIN is required for certain business structures, hire employees, or in some cases to open a bank account.

Connecticut Tax Registration Number: Businesses can register for their Sales Tax Permit, withholding taxes, and other state taxes with the Connecticut Department of Revenue Services.

Trade Licenses: Some services, such as acupuncturists, family planners, landscape architects, and pharmacists, require licensing in Connecticut.  While this isn’t a license on the business, licensing is required to operate.

Zoning Permit: Many cities and/or counties require zoning approval before operating a business out of a location, which sometimes includes home-based businesses.

Related: What business licenses and permits are needed in Connecticut?

Establish a separate business bank account to keep your business finances separate from your personal finances. This is important for accounting, tax, and liability purposes. Every bank is different, but in general, they will request:

Sole proprietorship & partnership – Trade Name Certificate, EIN or SSN and owner(s) drivers license
Corporation – Articles of Incorporation, bylaws, Certificate of Good Standing, EIN, and owner(s) drivers license
LLC – Articles of Organization, Operating Agreement, Certificate of Good Standing, EIN and owner(s) drivers license

Having a great idea is a big part of starting a business in Connecticut, but it can be challenging for entrepreneurs can find the funding they need to get their business off the ground.

There are a number of sources to find funds, from a Small Business Administration (SBA) loan guarantee, traditional bank loans, investors, or the Connecticut Department of Economic and Community Development has incentives, such as the Connecticut Small Business Boost Fund.

Related: Understanding the different types of business funding.

As a small business owner in Connecticut, hiring your first employee is a significant milestone that marks the expansion and growth of your enterprise. However, this exciting step comes with a new set of responsibilities, including compliance with federal and state employment laws, payroll and tax management.

It’s crucial to thoroughly prepare for these challenges and requirements to ensure a smooth and successful transition into your role as an employer.

Related: Steps to hiring your first employee in Connecticut.

Insurance plays a vital role in safeguarding your investment, employees, and business operations. When starting your business, there are several key considerations to keep in mind when it comes to insurance coverage:

Assess your risks: Every business has unique risks based on its industry, location, and specific operations. Begin by conducting a thorough risk assessment to identify potential exposures, such as property damage, liability claims, or employee injuries. This evaluation will help you determine the appropriate types and levels of coverage needed to protect your business.

Understand mandatory insurance requirements: As a small business owner in Connecticut, you may be required to carry certain types of insurance, depending on your business structure and operations. For example, workers’ compensation insurance is mandatory for most businesses with employees.

Explore additional insurance options: Beyond the mandatory insurance policies, consider additional coverage tailored to your specific business needs. Some common types of business insurance include:
– General Liability Insurance: Protects against third-party bodily injury, property damage, and personal injury claims arising from your business operations.
– Property Insurance: Covers damage to your business property, such as buildings, equipment, and inventory, resulting from events like fires, theft, or natural disasters.
– Professional Liability Insurance: Also known as Errors and Omissions (E&O) insurance, this coverage protects your business against claims of negligence or mistakes made while providing professional services.
– Business Interruption Insurance: Provides financial support if your business operations are temporarily halted due to a covered event, such as a natural disaster or fire.

Bundle policies to save on premiums: Many insurance providers offer bundled packages, known as Business Owners Policies (BOPs), which combine multiple types of coverage at a lower cost than purchasing individual policies. Consider a BOP to maximize your coverage while saving on premiums.

Work with a trusted insurance agent: Partnering with an experienced insurance agent who understands your industry and business needs is invaluable. They can guide you through the process of selecting the right coverage, help you assess your risks, and ensure that you receive the best value for your insurance investment.

By taking these considerations into account, you can build a comprehensive insurance plan that protects your small business from potential risks and liabilities, providing peace of mind and a solid foundation for growth and success.

Related: Types of insurance your business may need

A good bookkeeping system is essential so a business can track its income and expenses, as well as accurately report its taxes and ensure compliance with state and federal regulations.

Having a good bookkeeping system also enables businesses to make informed decisions about their finances. By tracking income and expenses, businesses can better understand their financial performance and identify areas where they may need to improve or adjust spending habits. This information can help them plan for the future and make more informed decisions about how to allocate resources.

Related: Setting up accounting for a business