CT LLC Formation: Everything You Need to Know
The LLC business structure provides limited liability protection for its owners. 4 min read
2. Requirements for Forming Your CT LLC
3. Taxes for your LLC
4. Additional Requirements
CT LLC formation is simple and straightforward. The LLC business structure provides limited liability protection for its owners. In addition to operating a business through an LLC, this type of business designation is also common for holding assets, such as real estate, automobiles, boats, or aircraft.
Requirements for Forming Your CT LLC
Different states have different requirements for forming an LLC, and the state of Connecticut has some of its own unique requirements. Some of the many requirements for forming your CT LLC include the following:
- Registration, which includes the filing of the Articles of Organization
- Paying the necessary filing fee
- Drafting an operating agreement
All businesses wanting to form an LLC must file the Articles of Organization with the Connecticut Secretary of State.
Information included in this document is the business name and address, description of the business, registered agent name and address, member and/or manager names, titles, and residential addresses, type of management (member or manager-managed), execution date (when you want to begin conducting business), the organizer’s signature, and the registered agent’s signature. Connecticut charges a $120 filing fee. The processing time takes up to 6 weeks depending on how many submissions are with the Secretary of State’s office at the time of submission. However, the state provides expedited services (24 hour turnaround time) for an additional $50 fee.
Next, you should draft an operating agreement. While Connecticut doesn’t require this, it is especially important and helpful for multi-members LLCs. This agreement will include important items such as the voting rights of all members, duties and roles of each member, how members can be added or removed, how and when meetings will be held, and dissolution of the LLC.
Taxes for your LLC
After forming your LLC, there are some potential tax implications that you should be aware of.
Note that LLCs in the state of Connecticut are viewed as disregarded entities, meaning that the LLC members must choose to be taxed as a sole proprietorship, corporation, or limited liability partnership. The business will have to abide by the specific tax structure when it comes time to pay taxes.
- LLC taxed as a LLP: Form 1065, which indicates how the profits, losses, and credits are distributed to each member. You’ll also need to fill out Schedule K-1, which will then be given to each member for inclusion on his or her personal tax returns.
- LLC taxed as a C corp: Form 8832, which simply indicates that you are requesting your LLC be taxed as a C corp. You’ll also need to file Form 1120, which is the corporate income tax return.
- LLC taxed as S corp: Form 1120 along with a report from each member indicating how the profits, losses, and credits are distributed amongst members.
- LLC taxed as sole proprietorship: Such LLCs must report all business income, losses, and expenses on the sole proprietor’s personal tax return via Schedule C (Form 1040).
In addition to filing the Articles of Organization, paying the applicable fee, and drafting an operating agreement, you will need to obtain a federal Employer Identification Number (EIN) with the IRS. You will need this EIN to open a business bank account.
Thereafter, you will have to register your newly formed LLC with the Connecticut Department of Revenue Services or Connecticut Department of Labor if you intend on hiring employees and/or withhold sales tax. If you sell goods, you will need to withhold sales tax of approximately 6%. If you do in fact plan on hiring employees, you will also need to obtain unemployment insurance along with workers' compensation.
You might want to obtain a trade license, however, this isn’t required. In addition, you might need to obtain additional permits or licensing at the local or county level if the locality in which you operate requires it. Furthermore, if you are going to operate out of a physical brick-and-mortar shop, then you might need to obtain a zoning permit.
After forming and completing the above-mentioned additional requirements, you will need to file an annual report by the end of the month that you initially established your LLC. The fee for filing this report is $20. Your CT LLC must also pay taxes. The state personal net income tax rate is 3% ($0 to $10,000) or 5% (greater than $10,000).
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