How to Start a Business in Connecticut in 2021: The Ultimate Guide, Step-by-Step

How to start a business in Connecticut

For those that will like to start a business in Connecticut, this article will perfectly guide you through the step-by-step process of registering a business in Connecticut.

According to a study by Phoenix Marketing International, Connecticut had the third-largest number of millionaires per capita in the United States, with a ratio of 7.75%.

With the 9th-best access to venture capital in the nation, Connecticut is a fabulous place to launch your business. Start your business today with our simple step-by-step guide and get on the fast track to financial and personal independence.

Quick Facts about Connecticut

With limited natural resources, a well-educated and innovative citizenry has enabled Connecticut to reach high levels of productivity. Connecticut’s creative genius—manifested in such innovators as Eli Whitney, Samuel Colt, and Charles Goodyear—has produced large numbers of significant inventions and patents.

Quick facts about Connecticut

  • The state is named after the Connecticut River, which bisects the state and is a major river in the U.S.
  • On August 22, 1902, Theodore Roosevelt became the first U.S. president to ride in an automobile while in office.
  • Connecticut has 169 towns, 21 cities, and 9 boroughs.
  • The Constitution State is home to Samuel Colt, the inventor of the revolver.
  • Connecticut has the highest personal income per capita (more than $70,000) in the country. However, the national average is $50,392.

Why Should I Start A Business in Connecticut

With over 500 companies, pioneering start-ups, established leaders, emerging innovators, natural resources, cultural resources, nationally ranked schools, and a productive work environment in Connecticut, the state remains open to original ideas and fresh thinking that allows businesses to thrive. Connecticut has proven to be a strong business destination for the following reasons:

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Strategic Location

Connecticut is at the very center of the northeastern U.S. economy. With easy access to Boston and New York, it costs less to reach one-third of the entire U.S. economy and two-thirds of the Canadian market from here.

SEE ALSO: How to Start a Business in New York in 2021: The Ultimate Guide, Step-by-Step

Quality of Life

Connecticut ranks among the nation’s top states for quality of life. Great public schools, scenic suburbs, a low crime rate, vibrant yet manageable cities, access to exceptional healthcare, and a diverse array of recreational options are just a few of the reasons so many enjoy living here.

Exceptional Workforce

Connecticut’s workforce is among the nation’s most highly skilled — and highly productive. So, whether you’re looking to staff your company with top talent or simply want to work alongside those you can respect and learn from, Connecticut is a great place for good people.

Vibrant Arts & Culture

Connecticut is alive with the arts — from nationally renowned art galleries and museums to award-winning theaters and cultural events, from historical sites and major concert venues to local galleries and community fairs. Learn about the diversity of experiences Connecticut offers you.

Growing Business Sectors

Long known as a leader in advanced manufacturing, aerospace, finance and insurance, Connecticut is also home to thriving sectors in bioscience, green energy, technology and digital media. This array of rapidly advancing industries positions the state for continued growth.

How To Register A Business in Connecticut

You can register your business in Connecticut online or in person. To register online, you need to make the payment from your savings or checking account. After registering online, ensure you print out a temporary permit which you can operate in the meantime. You will receive your registration package with your permanent Connecticut tax registration number after 10-15 business days. Click here to register a new business online.

Alternatively, you can apply in person at their field offices during business hours. To apply, you need to bring a photo identification and a check or money order for the registration fee. This application must be signed by the individual owner, partner, officer of the corporation, member of the LLC or any other authorized person.

The registration fee is $100 one time permit fee.

How To Start A Business in Connecticut: CT Business registration

To start a business in Connecticut, there are certain steps you need to heed. From licenses and permits to taxes and insurance, learn what you need to do to start a business in Connecticut.

#1 Choose a business idea

Before you register a business in Connecticut, you need to decide what kind of business you fancy. Look for an idea that suits your interests, personal growth and natural abilities. This will help you stay on the right track and make the best business decision.

#2 Write a business plan

With a nice business idea in place, you need a solid business plan to back it up.

Before committing a significant amount of money and other resources toward your business, critically analyze your idea and create a game plan.

Writing a business plan helps you connect the dots and create a roadmap that will guide your business journey.

#3 Choose a business entity

The business entity refers to how a business is legally set up. It shows the legal structure of a company.

There are four business entity types: sole proprietorship, partnership, corporation and limited liability company(LLC).

Sole proprietorship: This one-man business is one of the easiest and least expensive of the four business entities. While the initial stage may be the big selling point, a major downside to the sole proprietorship is that the owner is personally responsible for the company’s debts and actions.

To establish a sole proprietorship in Connecticut, you don’t need to file any organizational documents with the state.

Partnership: This business entity comprises two or more people running a business together. Just like the sole proprietorship, there is no formal state filling. Also, like the sole proprietorship, the partnership has unlimited liability.

To create a general partnership in Connecticut, you don’t need to file any organizational documents with the state. Although not legally required, all partnerships should have a written partnership agreement. The partnership agreement can be very helpful if there is ever a dispute among the partners.

#4 Register a business name

Once you’ve chosen a business entity, the next step to take is to register a business name.

For LLCs and corporations, you will need to check that your name is distinguishable from the names of other business entities already on file with the Connecticut Secretary of State (SOS). You can check for names by doing a business entity search on the SOS CONCORD system.

You can reserve an available name for 120 days by filing an Application for Reservation of Name. There are certain name requirements for LLCs and corporations (like including a word such as “LLC” for LLCs or “Company” for corporations).

For a sole proprietorship or general partnership in Connecticut, that uses a business name that differs from the legal name of the business owner (for a sole proprietorship) or surnames of the individual partners (for a partnership)? If so, you must register a trade name with the clerk of the city or town where you do business. For more information, check the website for the relevant city or town.

If you plan on doing business online, you also have to register your business name as a domain name. In order to avoid trademark infringement issues, endeavor to do a federal and state trademark check to make sure the name you want to use is not the same as or too similar to a name already in use. See How to Do a Trademark Search for more information.

#5 Get licenses and permits

Certain licenses and permits will be needed to operate a business in Connecticut, and the ones needed will vary on the business’s activities and location. Some common registrations include:

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

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.

SEE ALSO: How to Start a Home Business: The Ultimate Guide, Step-by-Step

#6 Get an EIN

The Employer Identification Number or EIN also referred to as the Federal Employer Identification Number or FEIN is a nine-digit tax identification number issued by the Internal Revenue Service (IRS). This number identifies a business operating in the U.S and is used for paying payroll taxes, filing tax returns, and more.

 If your business has employees or is taxed separately from you, you must obtain a federal Employer Identification Number (EIN) from the IRS. Even if you are not required to obtain an EIN, there are often business reasons for doing so.

Banks often require an EIN to open an account in the business’s name and other companies you do business with may require an EIN to process payments. You can get an EIN by completing an online application on the IRS website. There is no filing fee.

#7 Obtain insurance

When starting a business in Connecticut, obtaining a business insurance is critical to protecting your business.

Most types of business insurance are optional, except for workers’ compensation insurance in most states. Some states will also require professional liability insurance for businesses offering certain services and commercial auto insurance.

Even if insurance isn’t required, and there is a fire, theft, or personal injury lawsuit, the business owner may have to pay out-of-pocket for damages and legal fees. Home-based businesses and side-businesses may want to consider business insurance, too, as personal home and vehicle policies may not cover in the event of a business loss.

Connecticut LLC vs Corporation

Traditionally, small business owners prefer LLCs—they have fewer annual requirements, flexible management, and great tax options which make them easier to manage. Corporations typically require more maintenance but are attractive for large business owners who want to sell stocks to investors. The established, well-defined business structure is also appealing.

But, what about Connecticut? Are there benefits for a Connecticut LLC vs a Connecticut corporation?

Overall, Connecticut LLCs are cheaper and easier to maintain than Connecticut corporations. The cost for filing a Certificate of Organization is $120 compared to $250 for a Certificate of Incorporation. Also, if your corporation authorizes more than 20,000 shares, you could end up paying a higher filing fee. Both entities are required to file annual reports; however, LLCs will pay significantly less than corporations—$80 vs $150.

Connecticut corporations also tend to get hit harder during tax season—paying 7.5% of their annual income—plus an additional 10% if earnings surpass $100 million. The rate for personal income will vary but tops out at 6.99%. Also, keep in mind that corporations are often subject to double taxation.

Whether you start a Connecticut LLC or a Connecticut corporation will really depend on your personal business goals. If you want to attract investors and don’t mind a little higher fees, then a corporation is definitely your best choice. But, if owning a smaller business is more your goal, then you should consider a Connecticut LLC.

Top Companies in Connecticut

As a business inclusive state, companies always look to establish their businesses in an environment that allows businesses to grow and innovations to thrive. Here’s our list of the top 15 businesses in Connecticut:

  • United Technologies
  • XPO Logistics
  • Amphenol
  • Otis Elevator Company
  • Stanley Black & Decker
  • Aetna
  • Cigna
  • Carrier
  • Western Connecticut Health Network
  • Xeros
  • EMCOR Group
  • Nestle Waters North America
  • Praxair
  • Harman International Industries

Final Thoughts

With over 500 companies, pioneering start-ups, established leaders, emerging innovators, natural resources, cultural resources, nationally ranked schools, and a productive work environment in Connecticut, the state remains open to original ideas and fresh thinking that allows businesses to thrive.

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