How to start a business in Connecticut [Updated 2024]
Seeking proximity to bustling New York City but in a state that’s more business-friendly? Look no further than Connecticut. This beautiful New England state has a variety of busy cities of its own (think Hartford and Stanford) as well as gorgeous scenery, a pro-small-business state government that offers plenty of incentives, and much more.
To get going, you’ll need to do a lot of legwork—you have to conduct market research, come up with a business name that’ll have customers flocking to you in droves, and collect the capital you need for your startup or small business. You also need to select the right business structure, get a federal employer identification number from the IRS, and comply with the state of Connecticut’s registration and tax filing requirements.
Sounds daunting? Starting a small business is tough, but it’s also exciting. Our step-by-step guide on business formation will tell you exactly what you need to do to set up a Connecticut business compliantly and cost-effectively.
1. Name your business
You’ll need a great name for your business idea. As you’re mulling over business names, it’s important to make sure the one you want complies with Connecticut state regulations. Here’s what you need to do:
- Check that your proposed business name is available using the Connecticut Secretary of State’s search portal.
- Make sure it meets the state’s naming criteria. Among other rules, your business name must be unique.
- Search the database of the US Patent and Trademark Office and ensure your chosen business name isn’t trademarked by someone else already.
- Either lock in your business name with the Connecticut Secretary of State when you file your registration paperwork or reserve your chosen name for 120 days using this application.
You don’t want to pick a fantastic business name only to find out the web domain name and social media accounts for it have already been taken by another company. So, it’s best to register for those at the same time.
Under certain circumstances, you may need to register a trade name certificate for your business. “Trade name” is Connecticut’s term for a “doing business as” or DBA name. Here’s when you need to do it:
- You’re operating a sole proprietorship or limited or general partnership using a business name that doesn’t contain the name of one of the owners.
- Your Connecticut corporation, LLC, or LP is operating under a name other than the one you used when you registered your business entity.
If one of these applies to you, contact your local town clerk to find out how to register a trade name certificate in your location.
2. Explore your funding options
As you consider your various funding options—crowdfunding, securing a lender, or raising money from private investors—make sure you also explore the business grants and small business loans offered in Connecticut. This business-friendly state has a lot of options for new companies. You can learn more about the various funding available to you on the website of the Connecticut Department of Economic and Community Development, but here’s a breakdown:
- Connecticut Small Business Boost Fund. Among the many resources Connecticut offers to small business owners is the CT Small Business Boost Fund. This program provides financial assistance in the form of loans between $5,000 and $500,000 to people looking to start small businesses in the state. You’ll also get assistance from a support network that will provide guidance before, during, and after you apply for the loan.
- Federal loan programs. In addition to the Connecticut state government, don’t forget about the federal government. The Small Business Administration (SBA) offers business owners disaster relief, starter loans, and access to coaching.
3. Decide on your business structure
The structure you pick for your business determines how it’s taxed, the amount of personal liability you take on, and a number of other important factors. In other words, this is a crucial decision, and it’s one you need to make carefully. Below, we’ll review the basics of each of the six business structure types you can set up in the state of Connecticut:
Business type
What is it?
Pros and cons
Sole Proprietorship
A single-owner business that isn’t officially incorporated
✔ You don’t have to deal with annual tax filing—your business income is considered to be your own personal income.
✔ They’re easy and inexpensive to set up.
✘ All responsibility for taxes and liabilities—like debts and lawsuits—rests on you.
Limited Liability Company (LLC)
A business structure that combines the tax advantages of a partnership with the liability protection of a corporation. The owners are called members, and your LLC can have one or more members.
✔ You’re not personally liable for the actions of the LLC.
✔ You decide how you want to be taxed, and you can be taxed as a pass-through entity.
✘ It’s difficult to transfer ownership. Often, if an LLC member leaves, goes bankrupt, or passes away, the other members have to start a whole new LLC from the ground up.
✘ You’re not guaranteed 100% personal liability protection, no matter what. There’s still a risk that a judge will rule your personal assets to be linked to the business.
Limited Liability Partnership (LLP)
With this flexible business structure, each partner is only liable for the amount they invest in the company. LLPs are common in professional industries like medicine, the law, and accounting.
✔ Partners pool their resources and thus have access to more—such as more office space and greater profits—than they might on their own.
✘ LLP requirements vary by state, and depending on where you live, you may not be able to use this type of business structure.
Corporation
A corporation is legally separate from its owners, who are called shareholders. Corporations are managed by a board of directors, which the shareholders elect.
✔ It’s much easier to raise capital and attract investors than with other business structures.
✔ The corporation bears all the tax and legal responsibilities—you are not personally responsible for its actions.
✔ You can choose how to structure it. Corporations can be structured as an S-Corp or C-Corp (more common).
✘ Most people choose to structure their business as a C corporation, but this means they’ll have to pay “double taxes.” The corporation pays income taxes on its income, and shareholders pay taxes on the dividends they receive.
Limited Partnership
A business entity with one or more partners in which one partner, called the general partner, oversees the management of the business, while the other partners, called limited partners, are not involved in running the company
✔ Limited partners are only liable for what they invest into the company.
✔ You’re only taxed once.
✘ This type of business structure is subject to more regulations and government oversight than a sole proprietorship or a general partnership, meaning there’s more compliance and more paperwork involved.
✘ There is no liability protection for the general partner, who’s responsible if anything goes wrong.
General Partnership
A business made up of two or more people, called partners, who share both assets and liability
✔ The partners receive pass-through tax treatment and can deduct their share of business losses on their own tax returns.
✘ It can be difficult to attract investors since partners have liability for each other’s actions and debts.
4. Register your business in Connecticut
To register a new business, you’ll have to file some paperwork with the Connecticut Secretary of State. You can go online to myconneCT, which is the Connecticut Department of Revenue Services’ (DRS) online portal, to get a CT registration number so you can file and pay your taxes. Both of these steps must be taken by all business owners except sole proprietors and the owners of general partnerships.
Below is a brief overview of the registration forms needed for each business structure and the filing fees you should be prepared to pay.
Business type
How to register
Costs
LLC
File your articles of organization (use the Certificate of Organization Form) with the Connecticut Secretary of State.
$120
LLP or Limited Partnership (LP)
There is no official Certificate of Limited Partnership to fill out; instead, you need to send certain information to the Connecticut Secretary of State. The CT Economic Resources Center has more information.
$120
Corporation
File a Certificate of Incorporation with the Secretary of State.
$50 for non-stock corporations
$250 for stock corporations
5. Decide on a registered agent
If you’re registering a Connecticut LLC, corporation, an out-of-state entity, an LP, or an LLP, you’re required to assign a registered agent to your business. This can be either an individual or a company that’s legally permitted to do business in the state of Connecticut. A registered agent accepts tax and legal documents on behalf of your business.
You can act as your own registered agent if you’re over the age of 18 and have a physical address in Connecticut. Otherwise, the cost of hiring a professional to do it for you is anywhere between $49 and $337 per year—prices vary depending on who you choose, the needs of your business, and the speed of service you require.
6. Apply for an Employer Identification Number
A federal Employer Identification Number (EIN) is a unique nine-digit, federal tax ID number for companies that the IRS assigns. It’s just like a Social Security Number for individuals. Business owners in all 50 states need them to hire employees, pay them, open business bank accounts, obtain business loans, and pay their taxes. Getting one is quick, easy, and free. Just submit Form SS-4 to the IRS.
7. Get up to speed with Business Tax Credits
To encourage small businesses to settle in Connecticut and promote economic development, the state offers a variety of tax incentives, business tax credits, and abatements through its Department of Economic and Community Development’s Office of Small Business Affairs. Small business owners are encouraged to reach out to the Office of Small Business Affairs and look into which programs might benefit them. You can also find a list of Connecticut tax credits on the state website.
8. Stay on top of filing requirements and taxes
To remain in good standing with the state of Connecticut, you need to regularly file the correct state tax forms on time with the Department of Revenue Services (DRS). You can take care of your tax responsibilities through the myconneCT portal. Below, we’ll briefly discuss what small businesses need to send in when it comes to their state taxes:
- Sole proprietorship: You can file the income from your business on your individual income tax return.
- LLC: The IRS taxes your LLC based on how many members it has, and the DRS does the same. A single-member LLC is taxed like a sole proprietorship, while one that has multiple members is taxed like a partnership in Connecticut. Furthermore, LLCs are subject to CT’s new pass-through entity tax law (more on that below).
- Partnerships: Connecticut recently passed a pass-through entity tax (PET) law that imposes a 6.99% tax on a business entity’s taxable income. Partnerships, LLCs, and corporations must all pay this new tax. If your business is structured in one of these ways, you’ll need to make quarterly PET payments every April 15, June 15, September 15, and January 15.
9. Find a payroll solution
If you’re ready to hire employees or independent contractors to work at your Connecticut business, there are many employment and labor laws you need to keep in mind. For starters, you have to classify them correctly if you want to avoid being hit with expensive penalties. Additionally, you’ll need to be mindful of CT’s new minimum wage requirements: As of Jan. 1, 2024, Connecticut’s new minimum wage rate is $15.69 per hour for all employees. This is higher than the federal rate.
Payroll software is a must to ensure your employees and contractors are paid accurately and on time. Rippling will automate your payroll tasks, keep you compliant with overtime and other laws, and free up your time so you can focus on other things, like running your business. And with Rippling Time & Attendance, you can automatically track employees’ hours and set up notifications for when an employee is approaching overtime. Approved hours will sync seamlessly to payroll, and Rippling calculates net pay and taxes in seconds.
Planning on hiring globally? Rippling is designed to keep up with your business, no matter where in the world your team is located. With Rippling, you can:
- Include hourly and salaried employees, as well as contractors.
- Pay all your people in a single pay run— even if they’re across different tax jurisdictions and different currencies.
- Manage all of your people, systems, and data around the world in one place.
10. Support and scale your growing business with Rippling
An HRIS (Human Resource Information System) will be necessary to support your Connecticut business as it grows. This is a software solution you can use to streamline tasks like onboarding employees, running payroll, administering benefits, recruiting, and much more.
It’s best to start using an HRIS as soon as possible, especially if you have aspirations to grow your business globally. And as your business plans become reality and you start expanding internationally, Rippling has everything you need to run your global workforce—in a single system. There’s no need to involve yourself in a messy, expensive switch to a new system.
With Rippling, you can:
- Hire, manage, and pay your people—whether they’re based in Hartford, New Haven, or Hanoi.
- Prevent local, state, and federal compliance infractions, and develop a plan of action for compliance at each level.
- Bring all benefits—health insurance, 401(k), commuter, and more—into one system and automate manual tasks like updating deductions, enrolling new hires, and administering COBRA, thus freeing up time to focus on bigger-picture projects.
- Maintain updated recruiting data—from open headcount to new hires— effortlessly, and automate every step of the hiring lifecycle.
- Have a single source of truth for HR analytics, policies, and more.
FAQs about setting up a business in Connecticut
Do I need a business license in Connecticut?
Yes, most businesses need to obtain a CT business license from the Connecticut Secretary of State. You can find more information on general business licenses on business.ct.gov.
Do I need a business bank account when launching a business in Connecticut?
While you’re not required by law to open a separate business bank account, both the state government and the SBA recommend doing so—in addition to applying for a business credit card. Why? Well, having a separate bank account and credit card will help you streamline your business and personal finances, and having a business bank account offers some liability protection for your personal assets. Additionally, if you plan to hire employees, a business account will be necessary to process payroll.
Do I need to get business insurance?
All Connecticut businesses with one or more employees are legally required to have workers’ compensation insurance, and all vehicles used for business purposes need to be covered by commercial auto liability insurance.
What are Connecticut’s state payroll taxes?
There are three state payroll taxes in Connecticut:
- Unemployment Insurance (UI) — employer contributions
- Paid Family and Medical Leave — withheld from employee wages
- Personal Income Tax (PIT) — withheld from employee wages
Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.
