Setting Up an LLC in CT: Everything You Need to Know
It protects its owners from personal liability for business debts, avoids double taxation, and enjoys fewer rules and regulations.4 min read
A limited liability company (LLC) is a flexible hybrid business entity combining characteristics of a corporation and sole proprietorship. It protects its owners from personal liability for business debts, avoids double taxation, and enjoys fewer rules and regulations.
Steps to Form an LLC in Connecticut
1. Find a suitable and distinct name for your business that adheres to the state's naming rules. Make sure to include the words “Limited Liability Company” or the abbreviation “L.L.C.” or “LLC.” To use restricted words, like “bank” or “attorney,” request a permission and hire a licensed professional, like a doctor or lawyer. Avoid prohibited words like “FBI” and “Treasury.”
Check name's availability on the state's website. For $30, reserve a name for 60 days. If the name is available, register your domain name.
2. Choose a statutory agent (a registered agent), responsible for all legal correspondence for your LLC. You may appoint a Connecticut resident, any person within your company, or a corporation permitted to conduct business in the state.
3. File your articles of organization, also known as a certificate of organization, along with the $120 fee.
4. Create an operating agreement, defining the ownership and operating procedures for your LLC. Though not required, this legal document helps to settle disagreements within the company and is useful for LLCs with varying members' contributions and interests.
5. Hold the organizational meeting.
6. Obtain an Employer Identification Number (EIN), also known as a Federal Tax Identification Number, which is required for tax filings and opening business checking accounts.
7. Check with the following organizations about business licenses and permits requirements:
- The Connecticut Department of Consumer Protection
- The Connecticut Department of Energy and Environmental Protection
- The Business Response Center for the Connecticut Economic Resource Center
8. Register your LLC with the Connecticut Department of Labor if necessary.
9. Consider trademarking your business name.
10. If you have employees or sell goods and collect sales tax, register with the Connecticut Department of Revenue.
11. To conduct business in the state, apply for a Connecticut Tax Registration Number.
12. If your owner-employees earn more than $75,000 annually, consider electing S corporation status to save on self-employment taxes. When profits per owner exceed $250,000, you offer employee benefits, or reinvest majority of profit in the business, consider C corporation election to take advantage of low tax rates on retained earnings.
After Forming a Business
1. Open a business bank and credit card accounts to segregate your personal and business assets and expenses, to simplify the accounting, and to build your business's credit history.
2. If you have employees, register for unemployment insurance tax and employee withholding tax.
3. If you sell taxable goods or services in Connecticut, register for Connecticut sales and use tax.
4. Organize the books to keep track of your business finances and to simplify your annual tax filings.
5. Check with the following organizations about your licensing and permit requirements:
- The U.S. Small Business Administration guide
- The Connecticut government website
- Your local chamber of commerce
- Or use a professional service to learn about all your business licensing needs.
6. Acquire a mandatory workers' compensation insurance. Consider a general liability insurance.
7. Adhere to the following employee hiring regulations:
- Verify new employees' eligibility to work in the U.S.
- Report employees as "new hires" to the state
- Provide workers' compensation insurance for employees
- Withhold employee taxes
- Display compliance posters in visible areas of the work space
- Pay employees at least minimum wage at the state-specified periods
1. An annual report with the Connecticut secretary of state is due on the date of your LLC formation. By filing late, you lose your “good standing” status. If you fail to file, your LLC will be dissolved a year later.
2. A biannual business entity tax of $250 is due on April 15 of every other year. Late filing will result in a one percent penalty interest per month on unpaid tax.
3. Draft a business plan with the following sections:
- Title page and table of content
- Executive summary
- General company description
- Detailed description of your products and services
- Marketing plan
- Operational plan
- Management and organization
- Financial plan
3. Report your business income to the IRS.
4. Hire a registered agent service to remind you of upcoming filing deadlines and to submit reports on your behalf.
How to Dissolve a Connecticut LLC
To avoid tax liabilities, penalties, and legal issues when dissolving your LLC, close your business tax accounts and file the articles of dissolution.
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