Are you looking to form a limited liability company (LLC) in the state of Connecticut, but you’re not sure how the formation process works? There are several important steps when it comes to creating a Connecticut LLC that is compliant and able to do business in the state.
What is a Connecticut LLC?
The Connecticut LLC is one of the most popular business structures in state. It's a more casual and flexible type of business than a corporation, but includes the same personal asset protection you get with a corporation. That means you aren't personally liable for debts or lawsuits against your business. This is a critical protection that is lacking from sole proprietorships and general partnerships.
LLCs in Connecticut have simple formation and maintenance requirements, several options for how they can be taxed, and flexible management. From one-person businesses to multi-member LLCs with several owners, the LLC is a popular choice for a reason.
Forming an LLC in Connecticut (in 6 Steps)
Step One) Choose an LLC Name
Your LLC’s name is often the first impression you get to make on potential customers, and therefore it goes without saying that this is an important step. There are a few different aspects to take into consideration when selecting a name for your business:
Legalities: In the state of Connecticut, every limited liability company is required to have either the initials “LLC” or the phrase “limited liability company” in the name. In addition, you cannot include any words that refer to other business types (like “corporation” or “incorporated”), and you also can’t use words that are typically used to refer to specific kinds of businesses (like “bank” or “law office”).
Explanatory Naming: Another aspect to consider is including language that explains what your business does ― for example, if you’re a plumber, put the word “plumber” or “plumbing” in your LLC name. Additionally, if your business has strong values like being environmentally friendly, you can indicate that by including the word “green.”
Do You Like It?: At the end of the day, this is your business, and you should choose a name that makes you proud. You should also make sure your LLC name both sounds good when spoken out loud, and looks good when written down.
The most important consideration for naming an LLC is to not get too attached to any one business name until you have either reserved the name with the state of Connecticut, or you’ve officially formed your business. Connecticut makes this process rather easy, as you can search what names are already in use at this link. If you’re not yet ready to form your LLC, you can reserve your desired name with the Application for a Reservation of Name form. Please note that Connecticut charges a $60 fee to reserve a name, but doing so protects your chosen name for 120 days. When you’re ready to get your business rolling, your name will still be yours exclusively.
Step Two) Designate a Registered Agent
Every LLC in Connecticut is required to designate a registered agent, which is the individual or registered agent service that receives government correspondence on behalf of your business, then forwards those documents to you.
According to the Connecticut General Assembly, the responsibilities of the registered agent are,
to forward to the limited liability company or registered foreign limited liability company at the address most recently supplied to the agent by the limited liability company or registered foreign limited liability company any process, notice or demand pertaining to the limited liability company or registered foreign limited liability company that is served on or received by the agent.”
Incorporation Rocket Note: In Connecticut, you can choose either to appoint another person as your registered agent, or you may serve as your own. The agent must be a resident of Connecticut or is eligible to do business in the state.
Without a registered agent, you could lose your good standing with the state of Connecticut, and the state also has the right to dissolve your LLC if they decide to. In a worst-case scenario, the state could fail to alert you regarding a lawsuit against your company, which could even lead to a judgment against your business because you didn’t defend yourself.
Our Recommendation: At the end of the day, we recommend designating a Registered Agent service to handle these requirements. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off public record. Incfile and Northwest Registered Agent both offer a free Registered Agent service when you utilize their services to form an LLC. Both are fast and affordable. In fact, they’re the best available.
Step Three) File Formation Documents with State
Once you are ready to form your Connecticut limited liability company, you will fill out the certificate of organization.
This is THE document that will register your LLC with the state. You’ll want to ensure all of the following information is correct on the form:
- Your chosen business name
- Name and address of your registered agent
- Management style (member-managed or manager-managed)
- Name(s) and address(es) of the LLC’s manager
- Name and address of the LLC’s organizer
- Signature of organizer and registered agent
- Effective date
You can either fill out this form online, or you can print off the pdf and mail it. Please note that if you choose to file by mail and would like a certified copy for your records, you’ll need to pay an additional $40 per document.
Cost to Form an LLC: The state of Connecticut charges a $120 fee to form an LLC.
Processing Time: It takes 5-10 business days for the state to process your Connecticut LLC formation paperwork and get your finalized documents in the mail to you. During busier times, this process may take longer. However, if you wish to have your filing completed within 24 hours, you may expedite your incorporation for a $50 fee. Please note that the estimate of business days begins once ALL required paperwork is in order and filed correctly.
Step Four) Create an Operating Agreement
After you register an LLC in Connecticut, create a detailed outline that explains how you will run and manage your new business. Even though it doesn’t need to be filed with the state, put one together and keep it for your records.
When you open a bank account, you may be asked for this document in order to open an account. You’ll also want to keep in mind that any future business partners or managing members may also be interested in seeing your Operating Agreement before joining your company. After all, this document essentially serves as your overall plan for success.
An attorney can help you outline your Operating Agreement or create one from a free template online. You can read more about Operating Agreements here, but some of the basic information you’ll want to have includes:
- Individual members' ownership percentages
- Rights and responsibilities
- Voting powers and meeting guidelines
- Allocation of profits and losses
- Management rules for the LLC
- Provisions for buying a member owner out, or transferring their shares in the case of illness or death
Step Five) Handle Taxation Requirements
The vast majority of LLCs require a federal tax ID number, or EIN. An EIN is basically the business version of a social security number, and it’s used for a variety of important LLC functions.
For instance, you’ll need an EIN if you want to hire any employees, and many banks require them to open business bank accounts as well. You’ll also need one for tax purposes, hence the name federal tax ID number. Get an EIN for your LLC for free through the IRS.
Connecticut LLCs pay income taxes based on their formation structure. Sole proprietorship LLCs and partnership LLCs are classified as pass-through entities. These LLCs must file CT Form 1065 for their taxes. Corporation LLCs are taxed as such. You can learn more about Connecticut’s Corporate Income Tax here.
In addition to income taxes, Connecticut LLCs are all subject to the state’s Business Entity Tax. This tax is levied on a biennial basis. The fee is $250 and is due every other year on April 15. You can find the appropriate form and learn more about the Business Entity Tax here.
Sales and use tax in Connecticut is levied on businesses operating in retail, taxable services, and lodging. Every LLC in these categories must apply for a Sales Tax permit with the state’s Department of Revenue Services. You can learn more about the Sales and Use tax here.
Connecticut LLCs with employees must also pay withholding taxes. You can pay withholding taxes at the Taxpayer Services Center or over the phone using the Business Telephile System. In addition, LLCs with employees may need to pay unemployment insurance taxes (dependent on their taxation status). Paying unemployment insurance taxes protects your employees in the event that they are unable to work at no fault of their own. To clarify the uses and regulations behind unemployment insurance taxes, Connecticut has compiled an Employer’s Guide to Unemployment Compensation. You can also file and pay your unemployment insurance taxes here.
Depending on where in Connecticut your business is located, you could also need to pay some local taxes. The most important local tax is your property tax, but there are other taxes that may apply to your business that you’ll want to be sure to investigate.
Step Six) Obtain Business Licenses and Permits
Connecticut does not have a general business license that all LLCs must obtain. That said, there may be other licenses you need in order to do business in compliance with state and federal regulations. The licenses you’ll need are highly dependent on the nature of your business.
For example, if your industry is part of a federally-regulated industry, you’ll need to obtain the proper licensure from that agency before conducting business. Some of these industries include aviation, fisheries, agriculture, and more. Check here to determine if your business falls under federal regulations.
Other industries such as plumbing, hairdressers, and more are often regulated by state agencies. Fortunately, Connecticut offers a resource to help businesses determine which licenses they’ll need: call the Connecticut Business Hotline at the Connecticut Economic Resource Center to get started. The Department of Consumer Protection also lists all possible licenses and permits here.
Would you prefer to have a professional form your LLC?
If you would prefer to have a professional handle the paperwork for you, consider hiring an online incorporation service like LegalZoom and Incfile. To see which is the better option for you, check out our side by side comparison.
Next Steps: What to do After Creating a Connecticut LLC
Open a business bank account: We highly recommend that you establish a separate business banking account so that your business and personal finances are maintained completely separate. This is important because it helps protect your personal assets and also makes filing taxes much easier. Once you receive your EIN from the IRS, you’ll be able to use it to establish an account at the bank or credit union of your choice.
Get Business Insurance. Every Connecticut business with employees is strictly required to acquire workers’ compensation insurance (unemployment insurance is obtained through taxes—see Step Five). For more information on workers’ compensation, you can consult the State of Connecticut Workers’ Compensation Commission. After you obtain these legally required policies, it’s probably also a good idea to pursue general liability insurance, as well as some industry-specific policies.
Understand income reporting. Income reporting is just what it sounds like – reporting the income you made from your business. It’s important to note that you must file this form whether you made or lost money over the course of the year. The state of Connecticut has several forms based on how your business is set up that you can access here.
Understand annual reporting. Connecticut requires that all LLCs file an annual report within the first three months of the year. You can file it online here. Your annual report will essentially serve to update the state on any pertinent information regarding your business that has changed over the course of the year.
Find an accountant. We don’t recommend that you attempt to manage your business finances without the help of a professional. There is too much room for error, and a professional can ultimately save you time and money by guiding you on how best to manage your business finances. At a minimum, enlist professional help to set you up with software and the steps for keeping up with your finances on a regular basis. Then, consult back with your accountant at least a couple of times per year – and especially at tax time – to ensure you’re keeping track of everything correctly.