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Connecticut is America’s wealthiest state per capita, so could be enticing if you’re looking to launch a new venture. It is within reach of both the New York and Boston metropolitan areas and has its own densely populated pockets. The tax burden is relatively heavy in Connecticut—the Tax Foundation ranks it 47th out of the 50 states—but this money goes toward educating its workforce and funds various programs for small business owners. Here are the eight steps to starting a business in Connecticut, from brainstorming concepts to filing key documents.
Start a business in Connecticut
1. Choose a business idea
The first step to starting your own business is hatching a solid business idea. Some of the most successful business ideas involve never-before-seen products and services, while others meaningfully improve existing offerings. Whether you’re an inventor or innovator, make sure you can answer the following two questions before setting on your idea:
- Who is your customer? Have a clear understanding of who you’re selling to. Many business owners start with a market analysis to identify a potential customer base and examine what may interest them.
- What is your projected profitability? You have to make more than you spend, at least in the long term. Consider your pricing, distribution, and expenses. At what point do you break even? How long will it take?
2. Name your Connecticut business
Every business needs a business name. An effective business name shapes your customers’ first impressions and hints at your offerings. Here’s how to reserve a business name in Connecticut:
- Be unique and include specific words. Before registering a business name in Connecticut, search state business records to confirm that another company hasn’t already claimed it. Keep in mind that Connecticut LLCs must include the phrase “Limited Liability Company” or its abbreviations (“LLC” or “L.L.C.”) in their legal business names. Connecticut corporation names must contain one of the following words: “Incorporated,” “Limited,” or “Corporation.” Alternatively, you can use the abbreviations “Inc.,” “Ltd.,” “Corp.,” or “Co.”
- Register your business name. Once you settle on a name, file the Application for Reservation of Name form found on Connecticut’s business website. The filing fee is $60
- Register your DBA in your local community. DBA stands for “doing business as.” It refers to the name a business entity uses when interfacing with customers, different from its formal legal name. If you want a DBA, apply for a trade name certificate with your town clerk. Filing fees are set at the local level. You do not register DBAs with the Connecticut Secretary of State.
- Reserve domain names and social media handles. Make it easy for customers to find your Connecticut business online by securing a domain name (URL) and social media handles that align with your business name or DBA. Shopify’s domain name generator can help you find a relevant, memorable domain name
3. Write a business plan
Business ownership requires a goal-focused approach, and the best way to set goals is to draft a business plan. A well-crafted business plan lays out company objectives, sets growth expectations, and establishes measurable benchmarks for success. If you’re unsure where to start, use a business plan template or consult business plan examples. Most comprehensive business plans include:
- An executive summary
- A company description and mission statement
- A portfolio of products or services
- A summary of the company’s organizational and managerial structure
- Financial plans, including forecasted business income and business expenses
- A customer segmentation report
- Market research and target market analysis
- A comprehensive marketing plan
- An operations and logistics plan
4. Choose a business structure and get started
Your Connecticut business will likely take one of three business structures: a sole proprietorship, limited liability company (LLC), or C corporation. Each business structure has its benefits, operational requirements, and tax rules. Here’s how they work:
Sole proprietorships are informal business structures that function as a legal extension of the owner. Two or more owners can form a general partnership. Connecticut sole proprietors do not need to file legal paperwork nor maintain special accounting systems. Because sole proprietorships are not separate legal entities and do not offer liability protection, owners risk paying damages from their personal savings if their business is sued. This is why many sole proprietors keep separate bank accounts for personal and business expenses. Connecticut sole proprietorships appeal to solo business owners in low-risk industries with no employees.
A limited liability company (LLC) is a formal business structure owned by LLC members who control their company without oversight from a corporate board of directors. An LLC operating agreement establishes company structure and key management rules. As a legal business entity, an LLC provides personal asset protection, meaning owners’ personal assets are not at risk if the LLC is sued. LLCs are pass-through organizations, meaning profits and losses pass through to members, who report them on their personal income tax returns.
A C corporation is a legal business entity owned by shareholders. This formal business structure provides the most significant distinction between a company and its owners. Corporate assets are entirely separate from owners’ personal assets, and the corporation pays taxes unrelated to the taxes of its owners. C corporations are taxed at a corporate rate, different from the personal income tax rate. Connecticut corporations file a corporate business tax return and pay 7.5% on company profits. Compared to the LLC structure, the shares-based corporate model makes it easier to raise capital for business expenses, bring in new shareholders, or sell the corporation to new owners. Corporations need more formalized accounting and tax filing than LLCs or sole proprietorships and must maintain corporate boards of directors, name corporate officers, and hold periodic meetings.
Obtaining an EIN
All Connecticut employers must obtain a federal employer identification number (EIN) through the IRS. An EIN is your business’s federal tax identification number (similar to an individual’s Social Security number). An EIN allows you to hire employees, set up a business bank account, and obtain a sales tax and use permit from the Connecticut Department of Revenue Services.
Incorporating in Connecticut
You must file a Certificate of Incorporation to incorporate your business in Connecticut, which costs $250. Your Certificate of Incorporation will include:
- Your business’s name and mailing address
- Information about your business’s corporate shares
- Your registered agent’s name and address (which must be in Connecticut)
- The name and address of each incorporator
- Your company’s North American Industry Classification System (NAICS) code (which identifies your business industry and can be obtained from the Census Bureau)
5. Obtain Connecticut business licenses and permits
You’ll need a sales tax and use permit from the Connecticut Department of Revenue Services, which costs $100. This permit includes a Connecticut tax registration number, which you use to remit tax payments to the state. Connecticut does not issue a general business license, but depending on your industry, you may need licenses and permits to conduct business. To find out which ones apply to your company, visit the Connecticut Department of Consumer Protection website. You can also call the Connecticut Business Helpline at 1-800-392-2122.
6. Examine business insurance options in Connecticut
LLCs, LLPs, and corporations protect an owner’s personal assets in case of a lawsuit, judgment, or bankruptcy. However, companies with these structures still need business insurance policies to shield company assets. The Connecticut Insurance Department regulates the state’s insurance market and connects businesses and individuals to providers. Common policies include:
- Workers’ compensation insurance. Connecticut employers must obtain workers’ compensation insurance for their employees. Workers’ comp covers medical expenses if someone is injured on the job and makes payments to employees who miss work. Workers’ compensation policies do not cover independent contractors.
- Commercial automobile insurance. All commercial vehicles must be covered by commercial automobile insurance in Connecticut, including those that double as personal vehicles.
- General liability insurance. General liability insurance can protect your company if it’s found liable for property damage, libel, slander, misleading advertising, or bodily injury.
- Professional liability insurance. Professional liability insurance—also referred to as errors and omissions insurance—protects your LLC against claims that your advice or services caused financial harm.
7. Understand financial considerations
Starting a business comes with more startup costs than you might expect. Entrepreneurs pursue loans, lines of credit, investments, grants, and tax benefits to cover these costs. A strong business banking relationship—at a commercial bank or a credit union—can help. With an account in good standing, you can get a business credit card or a small business loan to help finance your expenses.
The Connecticut Department of Economic and Community Development and the US Small Business Administration (SBA) offer financial resources to startups. The SBA has two offices in Connecticut: the main office in Hartford and a second location in Bridgeport. You can also connect to commercial lenders and investors through merchant support services like Shopify Capital.
8. Market your business
A lot of planning goes into a business promoting itself. The process starts with building a brand—carefully auditioning logos, slogans, color schemes, fonts, and marketing language—and eventually developing a detailed marketing strategy to connect to your audience. An effective marketing campaign for your Connecticut small business might include:
- Market research. Understand your company’s target customer.
- Advertising and promotion. Get the word out with paid advertising, awareness content (blog posts, videos, newsletters), and search engine optimization (SEO). You can do this yourself or hire an agency.
- Social media. Promoting your products and services on platforms like Facebook, Instagram, and YouTube is essential in today’s business climate.
- Public relations. Identify and cultivate relationships with media outlets to organically increase your visibility.
- New business and customer retention. Build strong relationships with customers to keep them coming back and spreading the word.
Starting an LLC in Connecticut FAQ
How much does it cost to start a business in Connecticut?
Your Connecticut startup costs will vary depending on your business structure. LLCs must file a Certificate of Organization, which costs $120. Corporations must file a Certificate of Incorporation, which costs $250. All Connecticut employers need a federal employer identification number (EIN), which is free, and a sales tax and use permit from the Connecticut Department of Revenue Services, which is $100. You must also register your Connecticut business name by filing an Application for Reservation of Name, which costs $60.
What documents do I need to start up a business?
New Connecticut businesses need an Application for Reservation of Name, a federal employer identification number (EIN), and a sales tax and use permit. Connecticut LLCs need a Certificate of Organization, while Connecticut corporations need a Certificate of Incorporation. You may also need specific business licenses and permits, mostly issued at the county and city levels. For more information, call the Connecticut Business Helpline at 1-800-392-2122.
Is Connecticut a good place to start a business?
Connecticut offers the most affluent customer base in the US, proximity to the New York and Boston retail markets, and top-notch public schools. It also has notoriously high taxes (The Tax Foundation ranks Connecticut 47th out of the 50 states for its high personal and corporate rates, lower than any other New England state). But for many, Connecticut’s taxes are offset by a high standard of living and a customer base primed for discretionary spending.