Starting a Business in CT: Everything You Need to Know
When starting a business in CT, you should begin with by making a detailed business plan.3 min read
Create a Business Plan
Write a business plan to create a roadmap for where you want your business to go. Writing a business plan will help you work out details like cash flow management, securing funding, and tracking your business's progress as it develops.
While writing your business plan, be sure to focus on:
- Your pitch: A concise, one-page breakdown of your business plan.
- Your unique selling proposition (USP): Essentially your business's mission statement.
- Your target market: The demographics of who you're selling to and where.
- How you plan to market your business: What kind of advertisements will you use? Do you plan to use paid or unpaid advertisements? Will you use social media platforms?
Choose a Business Structure
Once you have a plan formulated for your business, you can begin the formation process. First carefully consider which structure is the best fit for your business. There are several structures you can choose from. Factors to consider include the management structure of your business, taxes, and liability:
Sole proprietorship: An individual entrepreneur who goes into business on their own. This is the easiest entity to set up, not to mention the least expensive. It also carries the most risk as the owner is personally responsible for the company's debts and actions.
General Partnerships: These consist of two or more people who conduct business together. Like Sole Proprietorship, each of the partners can be held personally responsible should the company be sued. Profits and losses pass through the owner's tax return and all income is subject to self-employment tax.
S Corporations: These are structured more formally with a board of directors, corporate officers, and up to 100 shareholders. There is no corporate tax as all income and loss are processed through shareholders' personal tax returns.
C Corporations: C corporations are structured similarly to S corporations, but they can have an unlimited number of shareholders. C corporations are the only business structure where the business and shareholders must pay taxes on profits. The corporation protects the owner's personal assets if the corporation were to be sued.
Limited Liability Company (LLC): This is the most popular structure as LLCs give the protection of a corporation without double taxation or the formalities of the board of directors or shareholders meeting.
Choosing to form an LLC in Connecticut will give you the most flexibility in taxation options — for example, choosing to be taxed as a partnership or a corporation.
Register Your Company
After you've come up with a few business name options, you can go to the CT Secretary of State website to see if your name has already been chosen. See if a designation — "LLC", "Inc.", etc. — is a required part of the business name.
If applicable, register the company with the Connecticut Secretary of State website and/or file the Trade Name Certificate with Town or City Clerk.
Business License and Tax Obligations
In Connecticut, you may or may not need a general business license. You will, however, need a Connecticut Tax Registration Number (TRN), required for all businesses engaging in the sale of goods and services.
Every business in Connecticut may be liable for sales tax collection, and state withholding if you have employees.
You should also register for an Employee Identification Number (EIN) with the IRS so you aren't using your social security number. Your EIN will be used to identify your business in the U.S., track tax returns, and open a bank account.
Visit the Small Business Association website for helpful information on federal licenses and permits. In Connecticut, you can apply for a business license through the state's eLicense website.
Plan Your Business's Finances
It's a common mistake to run your business out of your own bank account. Keep your personal and professional expenses completely separate to create a strong financial foundation for your business.
Though it is a daunting task to secure funding for a small business, know that there are many funding opportunities available including:
- angel investors
- trade credit
- traditional bank loans
Market Your Business
Creating a brand that is professional and attractive is essential to marketing your business to your target market. Two of the most important things that impact your company's brand are your website and your business logo. How you market your business plays a huge role in your business's success.
If you need help starting your business in CT, you can post your legal need (or post your job) on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.