If you’re here, that means you’ve either made the decision to form a Limited Liability Company (LLC) in Connecticut or you want more information about the process of forming an LLC in Connecticut before you make the leap. Congratulations are in order in either event because it’s always exciting to start a new business or expand your company into a new state. The decision to form a Limited Liability Company (LLC) is one that will have a huge impact on your business.
I’m going to break down the steps of forming an LLC in Connecticut, but first I’ll explain some of the reasons that a small business owner may choose to form an LLC, as well as tell you what a Limited Liability Company (LLC) is so that you can decide if forming an LLC is a smart business move for you.
(If you want to skip to the ‘how to form an LLC’ section, click here)
Table of Contents
What Is A Connecticut LLC?
A Connecticut LLC is a Limited Liability Company formed in the state of Connecticut that is governed by the laws, regulations, and statutes of the state of Connecticut.
Why Choose An LLC?
You’ll find many advantages to forming an LLC over time. Here are some of the most common reasons that small business owners cite as the factors that influenced them to decide to form an LLC in Connecticut.
1. Limited Liability And Asset Protection
The main reason that many small business owners choose to form an LLC in Connecticut is simple: the owner of a Limited Liability Company (LLC) is not responsible for the debts and liabilities of their LLC.
This means that if your Connecticut LLC happens to be sued or goes bankrupt, the people or companies that sue your LLC can’t list your personal assets in the suit as a means of compensation for the debt owed to them by your Connecticut LLC. So, things like your car, house, boat, your personal finances in your bank account, and other personal assets are off-limits. It’s easy to see why many business owners are fond of this perk.
The past two years have brought many calamities to the American people. We’ve seen numerous natural disasters and unexpected events (such as wildfires that spanned several states, horrible winter storms, floods, hurricanes, and a worldwide, viral pandemic) that have shown us that it only takes one such event to topple a successful business in Connecticut overnight. Even whenever there aren’t rampant misfortunes throughout the country, the business industry is always volatile and unstable, as is the economy.
For these reasons, small business owners love the protection that a Limited Liability Company (LLC) provides them. Even if you have to close your Connecticut business, you won’t lose your house and be homeless and your personal bank account will remain secure. It’s a massive sense of security for small business owners.
Another reason that small business owners choose to form an LLC rather than choosing a different business structure is the privacy and protection of your personal information that you can enjoy as a Connecticut LLC owner.
Unfortunately for most business owners, cybercriminals and scam artists have become quite skilled at what they do, in recent years. They can now steal your identity and amass thousands of dollars worth of debt in your name using information that the average person thinks of as inconsequential (like your name and address) so quickly that you won’t notice that it’s happened until it’s too late.
If you run a business with a structure such as a sole proprietorship, you’ll be forced to list your personal information for your business with the Connecticut Secretary of State. It will then be considered a matter of public record and added to the Secretary of State’s website for anyone (even cybercriminals) to access.
But when you start an LLC in Connecticut, you have the option to keep your personal information from being registered as your business information. All you need to do is hire an LLC formation service. They will register their own information for your business with the Connecticut Secretary of State, which keeps your personal information off of the public record and the Secretary of State’s website.
The last reason I’ll discuss here is a pretty important one: the tax benefits that you can enjoy when you form an LLC. These are most apparent when you compare a Connecticut LLC with a corporation.
If you choose to form a corporation, rather than an LLC in Connecticut, your business will experience what is referred to as “double taxation”.
Here is how taxation works for a corporation: the profits of a corporation are initially taxed at corporate rates. The (already taxed) profits are doled out to shareholders as dividends, which are also taxed. This results in the profits being taxed twice before the shareholders receive the funds. This is why it’s called “double taxation”.
There’s a difference in the way a Connecticut LLC is taxed, however. The profits of a Connecticut LLC are taxed at company rates (not corporate rates) and then disbursed to LLC members as personal income (not dividends). Of course, there is a personal income tax but it isn’t charged upon receiving the income. So, a Connecticut LLC isn’t taxed in quite the same way that a corporation in Connecticut is, and you can avoid “double taxation” entirely when you form an LLC.
It may surprise you to learn there are even more tax benefits from forming a Connecticut LLC.
In 2017, the Tax Cuts and Jobs Act was passed and it introduced a new type of tax discount called the Qualified Business Income Deduction (QBID). QBID is a 20% tax discount exclusively for LLCs. This is an excellent reason to form a Connecticut LLC today.
How To Start An LLC In Connecticut
Now that you know what a Connecticut LLC is and some of the reasons that business owners choose to form an LLC, you can decide whether this is the right structure for your business entity in Connecticut. Here are the steps you’ll need to take to start an LLC in Connecticut.
*IMPORTANT* If you’re inexperienced with the formation process in Connecticut and would like someone to guide you through the red tape and forms that you’re required to file to start an LLC, you’re in luck. There are professional business services designed to do exactly this. It’s called an LLC formation service.
An LLC formation service will help provide your privacy and take the guesswork out of starting an LLC in Connecticut on your own. LLC formation services can charge rates as low as $0 plus state filing fees. (But my favorite LLC formation service, ZenBusiness, charges $49 plus state filing fees.)
If you’d like to learn more about an LLC formation service that can help you legally establish your Connecticut LLC with the Connecticut Secretary of State, check out my article on the best LLC service.
1. Obtain Articles Of Organization Form
The first step on your formation journey is to acquire an Articles of Organization or Certificate of Organization form. (Both of these terms are used pretty interchangeably, so if you see it being referred to on one site as the “Articles of Organization form” and as the “Certificate of Organization form” on another website, just remember that it’s the same document.)
You can pick up a Certificate of Organization form from the Connecticut Secretary of State. The form is available for your LLC online in PDF form here.
The Certificate of Organization is the primary formation form you’ll need to start your Connecticut LLC, so the following steps will refer back to the Certificate of Organization form.
2. Choose Your Business Name
One of the first things you’ll need to list on your Certificate of Organization form is a name for your LLC.
However, you can’t just write in the first business name you think of. Businesses and LLCs must have names that are unique to them in the state of Connecticut, so you’ll need to make sure that no other business entity is already using the name you’ve chosen for your LLC. Luckily, it’s easy to find out if the chosen name for your LLC is available by searching the business name database on the Connecticut Secretary of State’s website, which you can find here.
It’s also worth mentioning that LLCs are required to include the words “Limited Liability Company” in their names. You can abbreviate the words to “Ltd.”, “Co.”, “Limited”, “LLC” or “L.L.C.”, and a great way to obtain your desired LLC name is by adding a suffix to it. It works a little like adding some numbers to the end of an online username once you’ve discovered that the original username you chose isn’t available.
Once you’ve finally found a name for your Connecticut LLC that’s available, you’re required to file an Application for Reservation of Name form (you can get the PDF here) with the Secretary of State which will reserve the LLC name for 120 days. This form carries a $60 filing fee.
If you’ve had to tack on a suffix to your LLC name or you simply aren’t fond of the official name that is registered with the Connecticut Secretary of State, you can use what is called a trade name, fictitious name, or DBA (“Doing Business As”) name. This is the name for your LLC in Connecticut that will be featured on signs, advertisements and will be known to the world. To apply for a fictitious name, you’ll need to register with the town clerk in the region your LLC does business. Here is a list of town clerks.
3. Choose A Connecticut Registered Agent
The next step to forming your Connecticut LLC is to appoint a registered agent. A registered agent, also known as an agent for service of process, is an individual or business entity that is authorized to act as the point of contact for your business.Your registered agent must be either a resident of Connecticut or a business entity that is authorized to act as a registered agent in Connecticut.
A registered agent must also accept mail and other important legal documents on behalf of your LLC. When you appoint a registered agent in Connecticut, they’ll list their name and address on the Certificate of Organization. This does mean that if you choose to act as your own registered agent you’ll have to list this information as well, resulting in your name and address to be listed on the public record.
There are other risks to operating as your own registered agent. If you miss an important legal document or a service of process, it could get your LLC into legal trouble and may result in your business losing its “good standing” status with the Connecticut Secretary of State. If this occurs, you could even lose your ability to conduct business in the state of Connecticut.
Professional registered agent services are available to help you and are fairly easy to find. The main benefit of using a professional registered agent service is a guarantee that you’ll receive any service of process or other legal documents that your LLC is sent by the state of Connecticut. Since your registered agent is required to list their information and act as your LLC’s legal point of contact, you can also rest assured that your information will remain off the public record. Registered agent services in Connecticut typically range from $99-$299 per year.
Because of the risks involved in acting as your own registered agent, I recommend that you use a professional registered agent service for your LLC. Even if this isn’t your first LLC, the added layers of security from cyber crime and the reduction in your workload are worth the expense.
If you’d like more information on the best registered agents in Connecticut, check out my guide to the best registered agents here.
4. Choose Your LLC Address
Once you have a registered agent for your Limited Liability Company (LLC), you’ll have to list the principal office address for your Connecticut LLC. This must be a physical address in Connecticut and cannot be a P.O. Box. Once you have this address, it must be listed on your LLC’s Certificate of Organization before you file that document. This address will also serve as the point of contact for your LLC if you’ve opted out of using a registered agent service for your business in the state of Connecticut. If you don’t have an office address for your LLC then you will be forced to register your home address or the address of at least one LLC member (which would be yours if you own a single-member LLC).
This can be problematic if you want to keep your information off the public record and away from the eyes of cybercriminals. If you use a registered agent service, they’ll register their name and address when you file your Certificate of Organization with the Connecticut Secretary of State, which will keep your personal information off the public record and secure from those who would misuse it.
Choosing to act as your own registered agent instead of hiring a registered agent service can be risky and leave your information vulnerable. I recommend using a registered agent service instead.
5. Sign And File Your Articles Of Organization
The final step to starting your Connecticut LLC is to file your Articles of Organization with the Secretary of State, accompanied by a $120 state filing fee . In Connecticut this document is referred to as a Certificate of Organization and must include the following information:,
- The LLC’s name and address,
- The name, signature, and address of your registered agent,
- The name and address of your LLC’s organizer,
- The name and address of at least one member or manager,
- The registered email address for your LLC, and
- The signature of the LLC organizer.
Once you have all of this information and have it quadruple-checked for accuracy, it’s time to sign and file your LLC’s Certificate of Organization with the Connecticut Secretary of State. For this part of the process, you have two options. You can file online via the website for the Secretary of the State, Business Services Division. If you choose to file by mail, send your documents and $120 filing fee to:
Business Services Division
Connecticut Secretary of the State
P.O. Box 150470
Hartford, CT 06115-0470
Once you’ve filed your Certificate of Organization with the Secretary of the State, you can expect a wait of approximately 7-10 business days until your documents are finished processing. If you choose to file by mail, you’ll also have to request a copy of your Certificate of Organization once your LLC formation has been approved, as the Secretary of the State does not send a copy of your approved certificate upon completion and approval of processing.
If you choose to file the documents for your LLC online, then you will receive a copy of your approved certificate via email once the Secretary of State has finished processing your documents.
Other LLC Activities
Even after you have finished filing your Certificate of Organization with the Connecticut Secretary of State, there are still a few documents and activities you’ll need to file and take part in.
To ensure your Connecticut Limited Liability Company (LLC) starts off on the right foot and stays in good standing with the Secretary of State, you’ll need to prepare for your annual report for filing. All LLCs in Connecticut are required to file an annual report between January 1st and April 1st of the year following their formation and every year thereafter. The Connecticut Secretary of the State issues annual report email reminders one month before annual reports are due. Several registered agent services also offer compliance alerts to help keep track of annual report filing. You must file your annual report online and the fee to file an annual report is $20. Here is the link to file your annual report online.
If you’re operating outside the state of Connecticut, then you’ll need to follow the process for establishing a foreign LLC. To register a foreign LLC, you must file a Foreign Registration Statement, Limited Liability Company-Foreign with the Secretary of the State. You must also appoint a registered agent with a physical address within Connecticut, much like a domestic LLC. The filing fee for a Foreign Registration Statement is $120 and this form can be filed online or sent by mail.
You’ll also need to ensure you pay your Connecticut state tax obligations. If your business in Connecticut will be collecting sales tax or selling goods, you’ll need to register with the Connecticut Department of Revenue Services. In addition to sales tax, you’ll also be required to register with the Department of Revenue Services if your LLC has employees. You can file your registration online or by mail.
Depending on what kind of business your LLC will be conducting and where it is located, you may have additional licenses to acquire. You can check the Connecticut Economic Resource Center for more information on what licenses your LLC may require.
If all these forms, annual reports, Connecticut Department of Revenue Services registration forms, and license applications seem overwhelming, there are services available to assist you. A Connecticut PEO service can lighten your workload and streamline the formation process for your LLC, and other online legal services offer help with filing your documents to help reduce your stress levels and paperwork.
Connecticut LLC Fee Summary
How much does it cost to form an LLC in Connecticut? Whether you choose to use an LLC formation service or form your LLC by yourself, you’re sure to encounter some type of state filing fee. Here is a list of some of the filing fee categories you’re likely to be charged for when you start your LLC in Connecticut.
Articles of Organization filing fee: $120
Name Reservation filing fee: $60
Registered Agent Fee: $99- $299
Annual Report filing fee: $20
State Personal Income Tax: 3%- 6.99%
State Corporate Income Tax: 7.50%
After Starting Your Connecticut LLC
Congratulations! You’ve gotten your Certificate of Organization filed and approved by the Secretary of State, as well as all the formation documents for your Connecticut LLC. It’s important to celebrate this victory for your business, so take a weekend trip or go fishing with friends, family, or your LLC partners.
Don’t take too much time off to celebrate, though. There are still a few more important tasks you’ll need to accomplish in order to make sure your Connecticut LLC remains in good standing with the Secretary of the State.
Step 1. Create An Operating Agreement
Your LLC in Connecticut isn’t under any obligation from the Connecticut Secretary of State to create an LLC Operating Agreement, I highly advise that you do. If you don’t design an Operating Agreement for your LLC, then your business will be stuck with the generic Operating Agreement that Connecticut supplies to businesses lacking an agreement. It’s not a guarantee that you’ll be satisfied with their rules for your business. It’s typically better for you to decide how your business will be run and make your own rules from its conception than to be told how you should conduct business.
A good way to understand how important Operating Agreements are is to think of your business entity as a computer. The LLC would be like the computer’s case, protecting it. The LLC Operating Agreement would be like the computer’s operating system which tells it what to do and how to respond.
What is an Operating Agreement? Operating Agreements are both a contract between LLC members and a list of instructions that describe in detail how your business will run. As such, your Operating Agreement should start by listing each LLC member, then proceed to describe the operational, managerial, financial, and structural aspects of your business.
*IMPORTANT* Before you create the Operating Agreement for your business, it’s important that you decide whether your LLC will be either member or manager-run. If you choose a member-run LLC, you can have a single-member system that is run by one member. This one member or manager will make all of the important decisions for your LLC. If you choose a multi-member managerial system, a group of LLC members, rather than one member, will vote on all business decisions.
As part of the managerial instructions included in your Operating Agreement, there will be a section that describes which member or members will have the authority to make decisions for your company. It should also include a structural section that defines the roles of each LLC member, their superiors, which LLC member or department they should most closely interact with, and the functions and roles of each department. And the financial portion of the Operating Agreement should list the ownership percentages and the percentages of profits and losses allotted to each LLC member. Defining all of these important business aspects should prevent a lot of disagreements in the workplace.
Operating Agreements should also include a section that provides a contingency plan in the event that an LLC member leaves or the business gains a new LLC member. Basically, it should come complete with a succession plan. Many LLC owners leave this portion out of the Operating Agreement, but it’s important because it provides clear instructions for what to do in the event of a disagreement between LLC members that results in one or more LLC members leaving the business. Clear, logical instructions during highly emotional events such as this are invaluable.
The LLC Operating Agreement for your LLC in Connecticut is a vital document during the first years of your business’s establishment. It provides details about what each LLC member should do, what each department is in charge of, the financial compensation of each LLC member, and how the business in Connecticut should be run.
Of course, if the Connecticut Secretary of State doesn’t require your LLC in Connecticut to create an Operating Agreement, that means there are no rules for how you are required to write the Operating Agreement for your business. However, you should definitely include the sections that I’ve listed here even if you add more of your own sections to the Agreement, and I’ll explain why.
Your business is legally required to operate according to the instructions that are detailed in your Operating Agreement, so if you screw up the Operating Agreement it could be detrimental to your business. Often, business owners forget or neglect to leave room in the Operating Agreement for things like business growth, innovation, or change. But if you create a well-thought-out and legally sound LLC Operating Agreement, you will be able to sit back and watch as your business flourishes without being confined to faulty operating instructions. A poorly designed Operating Agreement will stunt business growth.
If you’ve never drafted an LLC Operating Agreement and you want to make sure that you get the best possible operational instructions for your business, don’t worry. There are business services available for just this.
LLC formation services will assist you to create and file the LLC Operating Agreement for your business, which takes a lot of the pressure off. If you would like assistance with getting the wording right and ensuring that your agreement is legally sound, there are many online legal services to help LLCs in the state of Connecticut. And there is a free LLC Operating Agreement template on Northwest Registered Agent’s site, which you can get here.
Step 2. Apply For An Employer Identification Number
In addition to registering your business with the Connecticut Department of Revenue Services, depending on the type of business activities your Connecticut LLC conducts, you may need to obtain an EIN.
An Employer Identification Number (EIN) from the Internal Revenue Service (IRS) is necessary if your LLC plans on hiring employees, or has more than one member. All Connecticut LLCs are required to apply for an EIN if they have more than one member. Single-member LLCs are only required to obtain an EIN from the IRS if they elect to have their LLC taxed as a corporation or plan on hiring employees. The EIN serves a similar function as a social security number, acting as an identification number for your business and allowing your LLC to qualify for certain licenses and permits it may not be able to obtain without an employer identification number.
You can obtain an EIN from the IRS (Internal Revenue Service) via an online application process on their website. These applications can be submitted Monday-Friday between 7 am and 10 pm here.
Many LLC formation services in Connecticut offer EIN applications as part of their service package, which can lower the stress and workload of this process if you’d rather not file online or do the paperwork yourself.
Step 3. Open A Business Bank Account
This step is one many small business owners often overlook. Many first-time business owners believe they can keep track of all their expenses and remember which were for business and which were personal. However, unless you plan on keeping a very detailed ledger or logbook to track these purchases yourself, this type of practice often becomes detrimental during tax season.
Having a separate bank account will make tracking your business expenses simple and easy when tax season comes around. Instead of frantically trying to gather your paperwork or ledgers to tally up your business expenses, you’ll be able to request a statement with all of the relevant information from your LLC’s bank.
Another good reason to avoid sharing your personal bank account with your LLC is the limited liability and asset protection. If you choose to operate your business without a dedicated business account, your personal finances become vulnerable should your LLC become the target of a lawsuit or otherwise become involved with a legal issue. So, to enjoy all of the benefits of forming an LLC, it is vital to open a business bank account.
To open a business bank account, you’ll need to assemble what’s known as a “bank kit”. A bank kit includes certified copies of your LLC formation documents, such as your Certificate of Organization, EIN, and the Operating Agreement for your LLC. Some LLC formation services will compile a bank kit as part of their services. You can also collate all of these documents yourself, but using an LLC formation service can lessen the workload and margin of error.
Congratulations on launching your Connecticut LLC and taking all the steps to ensure you remain in good standing with the Connecticut Secretary of State. The decision to form an LLC is only the beginning of your business adventure, but you’ll remember this moment for a lifetime.
If you’ve decided to forego an LLC formation service (which can be as low as $0 plus state filing fees), then be sure to follow these five steps as you form your LLC in Connecticut:
- Obtain the Articles of Organization form
- Name your LLC
- Choose your Registered Agent
- Choose your LLC address
- Sign and file your Articles of Organization
It may seem like an ocean of bureaucracy and paperwork from the Secretary of State to get your LLC started, and it’s easy to get overwhelmed, but if you can get your LLC sailing on your own, then there’s nothing better than the sense of pride and accomplishment you’ll feel once you receive approval for your LLC. It’s worth all the work to know that you did it yourself.
Congratulations on your Connecticut LLC! Good luck on your business journey!