How to Start A Business In Connecticut

Key Takeaways

The key legal structures for a business include sole proprietorship, partnership, corporation, LLC, or Non-profit.
The registration of business happens with the Secretary of State after selecting a name.
The licenses and permits vary depending on the type of business.
An Employer Identification Number allows a business to hire employees and to get registered with Federal Authorities.
Opening a new bank account in the name of the business will enable you to pay taxes in the name of the business.

Critical Points for Starting a Business in Connecticut

Connecticut offers unique and beneficial business opportunities for entrepreneurs. With progressive government policies, it is easy to open and run a successful business in Connecticut. After deciding the industry in which one wants to step in, one needs to determine the mode of doing business and the legal entity of the business. Applying for registration and all necessary licenses is the next step toward starting a business in Connecticut. Other essential steps include having an Employer Identification Number and getting your office, sticks, plant, and machinery insured. Here is everything new businessowners need to know about starting a business in Connecticut:

Decide the Type of Business

Before starting the registration process, it is important to decide on the domain for a business. Even within an industry, there are multiple directions to begin a business. One needs to understand the reason behind starting the business and whether it will be sustainable in an increasingly competitive climate. Having a business background is not necessary, but having a general idea about the things relevant to your business may prove beneficial in the long run. A business should not only be running to generate a profit but also because the entrepreneur has a vision. It is important to decide the vision in order to follow it every step of the way during the establishment of the business.

Decide the Type of Legal Structure

Starting a business entity in Connecticut would also require the owner to choose the type of legal structure. There are five types of legal structures that have different characteristics and give the owner different benefits.

Sole proprietorship: A proprietorship is when only one person has ownership of the business, and their legal entity is the same as that of the business. There are no notable benefits except that one does not have to file anything separately with the state of Connecticut. The liability to the owner would be complete, and the profit and losses would reflect in the owner’s bank account directly. They would also have to pay taxes from their bank account.
Partnership: A partnership is also based on the social security numbers of the owners, like a sole proprietorship. The significant difference is that a partnership can be run by multiple partners, whereas a sole proprietor can only have one owner. The partnership is not a separate legal entity, and the owners have complete liability sustained during the course of business.
Corporation: There are two types of corporations: S corporations and C corporations. The difference is based on taxation. All corporations provide legal protection to the owners since they are separate legal entities from the owners. The filing process of a corporation is more expensive but also leads to more benefits and tax filing flexibility.
Limited Liability Company: An LCC or limited liability company needs to be filed with the Secretary of State as per the norms of Connecticut. It incorporates the features of a corporation and offers different tax benefits. Like a partnership, there can be multiple owners. There is no liability of the owners as it is a unique legal entity, separate from its owners.
Non-Profit: Non-profits are run not for profit but for causes of social good. The donations from patrons and the general public provide funds to these non-profits. They can be registered as separate legal entities. The owners would be personally liable for any losses or suits filed if not registered.

Find the Right Name to Register

Finding the right name for the business is a creative decision as it is a monetary one. If you do not choose a name you like, it can lead to a lot of paperwork being done twice. If you already have specific ideas, they need to be cross-checked with the Business Entity Database from the Secretary of State’s website. Then, at the time of choosing an appropriate name, you can book it until any necessary paperwork is completed with the registration. It would also be beneficial to find a domain name for the business website which corresponds to the name in the Business Entity Database.

There might be cases when the domain names might be unavailable, so checking simultaneously with company names can save time and effort. Additionally, one has to fill in additional paperwork for about $10 if they want to do business under an assumed name. A DBA or ‘Doing Business As’ requires a Trade Name form which has to be submitted to the Town Clerk’s Office.

The requirements for different business entities are different. For instance, an LLC has to submit its Letter of Organization to the Secretary of State. Filing paperwork for a corporation costs about $ 250 and should include the Letter of Incorporation. A non-profit also requires a non-profit at the time of registration. After registering with the Secretary of State, it is always essential to get registered with the Internal Revenue Service. It allows the business to become a registered tax-paying entity.

Get All the Licensing and Permits

The licenses and permits of a business are entirely dependent on the type of business and the law in Connecticut. Therefore, the Licensing regulations would have to be looked into on a case-to-case basis. However, some of the most common licenses and permits businesses come across in Connecticut include the following:

Connecticut Tax Registration Number: It is related to sales tax and is used to track businesses engaged in sales. The tax services would be easier to monitor through this permit. The Revenue Services of Connecticut state issue it.
Trade Licenses: An owner of a business might need a trade license if their business provides a service.
Zoning Permits: These permits depend on the zone in which the business is being set up. The permit would act as approval from competent authorities either in the city or the county within the state.

Connecticut Department of Consumer Protection has a complete list of all the licenses and permits required to run a business in the state. Before starting a business, it is legally mandatory to obtain all applicable registrations and licenses. There is also the website for Small Business Administration (SBA) that offers detailed information about the permits and other licensing procedures.

Choose the Right Location

Choosing a location depends entirely upon the type of business and the customer demographic you want to target. For example, Connecticut offers a variety of terrains, from beaches to crowded cities. Major cities can significantly boost the business if the customers are the target clientele. On the other hand, a business made for tourism would flourish in beachy topography.

After choosing the area where you want to open your offices, make sure to consider additional convenience factors. For instance, if you own a home in the city, the office should be at a convenient distance to reduce travel time. It should also be in a neighborhood that would be appreciative of the new venture. In addition to the travel time of the owner and other employees, one should look into whether suppliers and resources needed for the smooth functioning of the business are located nearby.

For some businesses, an official physical space might be optional. For example, while correspondence with the authorities would require the address of the agent, it is optional to have a physical space to accommodate all employees. Remote working is also possible, which would not restrict you from providing service across the state. It is especially beneficial for services instead of goods.

Open a Business Bank Account

A business bank account is necessary, especially if you are going to be transacting for a separate legal entity. Even with a sole proprietorship, making a different bank account can help manage finances. It is also crucial for tax filing. One can pay taxes from this bank account and receive tax returns corresponding to the business. The documents required for a bank account for a corporation or non-profit would ask for the Letter of Incorporation.

Similarly, a limited liability company might have to produce its Articles of Organization. The certificate of registration and Employer Identification Number is also necessary in some cases. For a sole proprietorship, the owner should necessarily have their social security number. For all businesses during businesses under an assumed name, they would have to carry a Trade Name Certificate to certify that they are ‘Doing Business As’ with adequate permission.

Get Insured

Getting the business premises, patents, and inventory safe from malicious intentions is also necessary when you are established. After you are ready to get the business off the ground, getting important assets insured can lead to a lot of conveniences and a risk-free daily operation. For example, if a business is hiring one or more employees in Connecticut, they are legally mandated to provide a workers’ compensation policy.

This policy covers any injury that occurs during daily operations. Other insurance policies include general liability and professional liability insurance. The former is done to protect the assets and resources under the name of the business. The latter is for professionals who are in consulting positions and work with the entity on a contractual basis. It protects them from any unfinished work claims.

Become an Employer

One can get their Employer identification number or EIN only after the business is registered with the IRS. An EIN works as an identification of a business entity, like a social security works as an identification number for citizens. Therefore, recruits are only legitimate if a business entity has its EIN. Additionally, one should keep up with the latest updates and regulations under the IRS employee tax laws.

Promote Your Business

The last step towards establishing a business is promoting it before opening its doors. Getting a marketing plan ready before stepping into a competitive industry can increase the chances of success. Before the opening date, it is imperative to get the word out to prospective clients. If you are able to generate footfall in the initial days and provide good service, the customer base will increase as the business grows.

A well-thought marketing plan acts as a guide in promoting the business in the initial stages. One can also make a portfolio of the customer demographic to understand better the type of clients you are serving in a particular location. Knowing factors like the cultural background and spending habits of the potential customer base can also help better target the market and promote services.

Summary

Connecticut requires business entity registration before allowing it to run within the state borders. A business entity can be a sole proprietorship with just one owner who has unlimited liability or a partnership where reliability is shared among partners. A corporation, a limited liability company, and a registered non-profit have different organizational structures. The legal entity's tax flexibility will differ based on the legal structure. The primary certification authorities are the Secretary of State and the Internal Revenue Service.

Even though registration with the IRS is mandatory, the tax filing for every entity may be different depending on the type of legal profile of the business. An EIN is necessary to hire employees and to open a bank account under the business name. Obtaining a Trade Name certificate is mandatory if the business operates under an assumed name than in the registration process. Other factors like convenience, customer demographic, and marketing tactics are also necessary to further the exposure of the business. Making a dedicated business plan would go a long way.

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