Guide to Starting an LLC in Connecticut
Starting a business can be a daunting task, but it doesn’t have to be. We will walk you through the process of starting an LLC in Connecticut and provide you with the information you need to get started. So whether you’re just getting started or you’re already well underway, read on for everything you need to know about starting an LLC in Connecticut.
Steps to Form a Connecticut LLC
The Limited Liability Company (LLC) is a popular business structure for many businesses starting in Connecticut. The LLC provides personal liability protection for lawsuits and business debts and can save money on taxes.
Unlike a sole proprietorship or partnership where the small business owner can be held personally liable for lawsuits against the business, the LLC is a separate legal structure, protecting the business owner’s personal assets.
Besides the liability protection, the Limited Liability Company provides several other benefits over the sole proprietorship, general partnership, and corporation because of the multiple tax options, ease of administration, and management flexibility.
Total Time: 10 minutes
Step 1: Choose an LLC Name
The first step in starting a Connecticut LLC is making sure the name you want is available. The LLC’s legal name has to differ from other business entity names in the state of Connecticut. Check on LLC name availability in Connecticut.
Per state law, the name of the LLC must include one of the following words or abbreviations at the end of the business name:
– Limited Liability Company
– Limited Liability Co.
– Ltd. Liability Company
– Ltd. Liability Co.
A comma may be used after the business name and before the designator. “Cowboy Cleaners LLC” and “Cowboy Cleaners, LLC” are both acceptable.
Before selecting a business name, you may also want to see if a domain name is also available to have a matching website address.
Step 2: Appoint a Connecticut Registered Agent
A Registered Agent must be selected and in remain in place to have a Connecticut Limited Liability Company. A Registered Agent is a Connecticut resident or a corporate agent with a physical street address in the state of Connecticut.
A Registered Agent receives service of process on behalf of the LLC. Service of process is when important legal documents, tax notices, summons, subpoenas, and other legal papers are sent to the LLC. These papers must make it to the correct person, so the entity has sufficient time to be notified about legal action and begin its defense.
The requirements to be a Connecticut Registered Agent include being at least 18 years of age, having a physical address in the state, and being available during normal business hours.
Any individual meeting the requirements can be the agent, however, the agent’s name and address becomes public record, and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when they are doing business from home or still employed. Hiring a commercial Registered Agent service like Northwest Registered Agent will help keep the owner’s names from being publicly listed.
Learn more about the requirements for a Registered Agent in Connecticut
Note that the Registered Agent will receive an email where they agree to be the LLC’s agent. A link in the email must be clicked within 48 hours; otherwise, the LLC filing will be rejected.
Step 3: File the Connecticut Certificate of Organization
The paperwork to create an LLC in Connecticut is called the Certificate of Organization and is filed with the Connecticut Secretary of the State.
To file, you can either create an account with the Connecticut Secretary of the State or download and mail in the Certificate of Organization form (referred to as the Articles of Organization in some states).
Turnaround time for the state to approve the Certificate of Organization is approximately 7-10 business days by mail or 2-3 days when filing online.
If you have questions, contact the Connecticut Secretary of the State.
30 Trinity Street
Hartford, CT 06106
Estimated Cost: 120 USD
When filing the Certificate of Organization, a few sections can trip people up. Let’s go over a few of those sections.
Principal Office Address – In this section, enter the initial principal office’s street address, city, state, and zip code. This address can be the LLC’s physical address or the address where the business records are kept. You may not use a PO Box address for the address of the principal office.
Organizer Information – The LLC Organizer is involved with the formation of the Certificate of Organization. The Organizer may or may not be a member, such as a mentor, attorney, or accountant, but the initial members could be an organizer.
Title – This selection refers to whether the individual is a member or manager of the LLC.
- Member – The members of the LLC have an active involvement in the day-to-day operations of the business. This is referred to as a Member-Managed LLC.
- Manager- If the LLC members hire somebody to run the company, similar to the position of CEO for a corporation, the title of the person would be a manager. An LLC set up like this is considered a Manager-Managed LLC.
- Managing Member – Is a hired manager who is also a member.
Most LLCs choose a member-managed management structure.
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You have a Connecticut LLC! Now what??
Once your new LLC has been formed, there are a few additional steps to take care of. Every business will be a little different, but here is a list of the most common tasks.
Prepare a Connecticut LLC Operating Agreement
The operating agreement is a document that governs the framework of an LLC. This document covers items like ownership rights, LLC member responsibilities, how profits and losses are distributed, and more.
Most states do not require an LLC to have an operating agreement, but it is still worth considering. Without an operating agreement:
- The LLC could be subject to default Connecticut state laws that may be detrimental in the event of a lawsuit.
- Member’s personal liability protection may be diminished.
- Members may not fully understand their roles and responsibilities, which could lead to costly disputes in the future.
Obtain an EIN
The EIN or Employer Identification Number (also called a Federal Employer Identification Number, FEIN, or Federal Tax Identification Number) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes. The EIN will be needed to hire employees, open a bank account, register for business licenses and permits, file tax returns, and more.
There is no cost for the EIN when registering through the IRS. The number is available immediately when applying through the IRS website; however, you can also register by phone, fax, or mailing IRS Form SS-4.
Related: How to Apply for an EIN
Elect the LLC’s Form of Federal Income Taxation
One of the major benefits of the Limited Liability Company is the tax flexibility it provides. When applying for the Employer Identification Number, you will choose how the entity will be taxed for federal income tax purposes. While there are some limitations, an LLC may be classified for federal income tax purposes as a:
- Sole proprietorship
While this may sound confusing, this refers to how the LLC is taxed, not the legal structure.
Related: How can an LLC be taxed?
By default, LLCs are pass-through entities. Instead of the LLC paying taxes on profits, the profits or losses flow through to the members.
Single-member LLCs will, by default, be taxed as a sole proprietorship. The members can elect to be taxed as a C-corporation or an S-corporation.
Multi-member LLCs will, by default, be taxed as a partnership. The members can elect to be taxed as a C-corporation or an S-corporation.
In general, the difference between being taxed as a corporation and being taxed as a sole proprietorship or partnership the profits and losses are passed to the member’s federal income tax returns based on their percentage of ownership. As a result, the owner will pay income tax and self-employment taxes on all business profits. As an alternative, electing to be taxed as a corporation allows the members to take a reasonable salary and then pay payroll taxes. Any remaining profits are distributed and aren’t subject to payroll taxes, resulting in potential tax savings.
Before electing how your LLC will be taxed, be sure to talk with an accountant to assess which one will be best for you.
Open an LLC Bank Account
Opening a new bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.
Several documents will be needed to open a business bank account, such as:
- A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
- Copies of the original formation paperwork from the state showing the creation of the business entity.
- Driver’s licenses of the members.
- Depending on the LLC age, a Connecticut Certificate of Good Standing may be needed to prove the LLC is active and in good standing with the state.
Apply for Business Licenses and Permits
Depending on the business activity and location, a variety of business licenses and permits will be needed. Some common registrations include:
- Business License – Some cities require businesses to obtain licensing or local permits before they can start.
- Employees – If you have employees, registration from the Connecticut Department of Revenue Services will be needed for the Employee Withholding Tax.
- Sales Tax Permit – To sell products and certain services, registration for the State Tax Identification Number will be made through the Connecticut Department of Revenue Services.
File the Connecticut LLC Annual Report
LLCs are required to file an annual report with the Connecticut Secretary of the State. The annual report updates ownership information and other details. The due date for the annual report is between January 1st and March 31st of every year.
Common Questions To Starting an LLC in Connecticut
How much does it cost to start an LLC in Connecticut?
There is a $120 state filing fee paid to the Secretary of State to start an LLC in Connecticut.
Is there a yearly fee for an LLC in Connecticut?
Each year there is an $80 state fee for filing the annual report.
How long does it take to start an LLC in Connecticut?
It normally takes 2-3 days for online filings and 7-10 business days for filings sent by mail for the state to approve the LLC paperwork.
Can you be your own Registered Agent in Connecticut?
Anyone can act as a registered agent, provided they are at least 18 years old, reside in the state, and are generally available to receive documents during normal business hours.
Does an LLC need a business license in Connecticut?
It’s sometimes thought that the LLC and business license are the same, but they aren’t. An LLC is referred to as the business entity, which is how the business is organized to conduct business. A business license is approval from a government entity to operate legally.
What is a Foreign Limited Liability Company?
A Connecticut foreign LLC refers to an LLC that was formed in another state but wants to operate physically in Connecticut. Physically operating means having a presence, such as having an office or hiring an employee.
What is a Professional Limited Liability Company?
Businesses requiring state licensing in the state of Connecticut, such as attorneys, landscape architects, podiatrists, physical therapists, accountants, etc., can file as a Professional Limited Liability Company (sometimes referred to as a Professional LLC or PLLC) instead of an LLC. Filing for a PLLC is very similar to that of an LLC.
Is an LLC the same as a corporation?
Can you use a PO Box for an LLC in Connecticut?
A PO Box can only be used for a mailing address, but the Principal Office address and the address for the Registered Agent must be a physical street address in Connecticut.