Here's What You Need To Know About Starting An LLC In Connecticut

Are you thinking of starting a company in Connecticut? Do you have a business idea that you believe can be profitable? Before you take the next step, make sure you understand the various aspects that come with running a business. This way, you can make well-informed decisions that will help you succeed.

Choosing the Right Structure

One of the things you need to consider before starting a business is the structure of your company. Your decision will have a long-lasting impact on your company. It will determine your obligations with the state, the requirements you have to accomplish, and taxation treatment.

Among the more popular structures for many startups is the limited liability company (LLC). That is because of the advantages that it offers. If you choose this structure, you can enjoy pass-through taxation. That means you do not have to report taxes at a corporate level. At the same time, you also get liability protection similar to a corporation.

LLC owners are known as members. If you are the sole owner of your company, you will have to organize a single-member LLC. But, if you plan on having business partners, your company will be a multi-member LLC.

Knowing some of the advantages of an LLC will help you find out if this structure is right for you. Here are some of them:

• As stated earlier, an LLC comes with liability protection. That means that even if your company incurs debts or faces lawsuits, it will not affect the members’ assets. However, you have to make sure that you do not engage in any illegal or fraudulent activity.
• You can prevent double taxation.
• The profits and losses of an LLC can go directly to its members, who will then report them on their individual tax returns.
• The filing, compliance, and management requirements of an LLC are simpler and easier compared to that of a corporation.
• Unlike corporations, LLCs do not have to maintain detailed records or minutes of meetings and resolutions.
• LLCs have the freedom to select how to distribute profits.
• Starting a business as an LLC can help establish your company’s credibility.
• An LLC can help build your company’s credit history. That will help you secure loans of credits in the future.

Choosing the Location

If you think forming an LLC is right for you, the next thing you have to do is to choose where you will register your business. So, what makes Connecticut a good place to start?

The state is home to hundreds of thousands of small business entities. It has a business-friendly environment and the government implements various programs that offer short- and long-term benefits for companies. Qualified companies can enjoy tax exemptions and get access to grants or loans.

• Enterprise Zone Program – Small businesses located in so-called enterprise zones designated by the Department of Economic and Community Development can benefit from various tax incentives. If you qualify for this program, you can get a 10-year corporate business tax credit. For the first three years, it will be 100%. It will be 70% for the next seven years. You can also get low-interest and flexible loans.
• Tax Exemptions – The state offers tax exemptions for small- and medium-sized businesses. These include the following:
  • Real and Property Tax Exemption – Companies that install or acquire manufacturing equipment and machinery can get a 100% tax exemption for five years on these.
  • Sales and Use Tax Exemption – The state offers sales and use tax relief for certain startups.

Aside from these, the state also offers other tax credit, debt financing, and capital programs. Check with state agencies to find out if your company qualifies for any of them.

The Registration Process

Starting a business requires you to go through a registration process. The requirements and fees depend on state laws. Understanding the steps will help prevent possible legal issues.

• Business Name – You need to choose the right name for your company. Make sure it reflects the values and vision of your business. You should also ensure that your LLC name complies with the state’s naming guidelines.
  • You need to include a proper designator. You can use the phrase Limited Liability Company or any of its abbreviations like LLC or L.L.C.
  • It has to be distinguishable. That means you cannot use a company name if another business entity in the state has already taken it. You can do a business name search to check its availability.
  • You cannot use terms that could mistake your LLC for a government agency.

You can reserve a company name if you want. Submitting an Application for Reservation of Name to the Secretary of State and paying the $60 filing fee will reserve the name for 120 days.

LLCs also have the option to not use the legal name stated in their formation documents. In that case, you will have to file an application for an assumed name at the local government level. Contact the office of the town clerk to find out more about the requirements. Keep in mind that you will have to register your business first before applying for an assumed name.

• Compliance Requirements – You should also prepare for various compliance requirements that the state has set. It includes the filing of paperwork and payment of corresponding fees.
  • Certificate of Organization – To formalize your registration, you have to file a Certificate of Organization with the Secretary of State and pay $120. You can submit online, by mail, or personally. Fill out the form by disclosing the following pieces of information:
    • Name and address of the filer
    • Name of the LLC
    • Principal address of your company
    • Name, address, and signature of your registered agent
    • Names, titles, and addresses of the LLC members
    • A business email address
    • The execution date
    • Name and signature of the company organizer
  • Registered Agent – You will need to appoint a registered agent for your LLC. It can be an individual or a business entity.
    • If you nominate an individual:
      • a resident of the state
      • at least 18 years old
      • has a complete street address in the state
    • If you elect a company,
      • has a certificate of authority to do business in the state
      • has an address recorded on the Secretary of State’s files
  • Operating Agreement – The operating agreement is an internal document. So, there is no need for you to submit it to the state. However, having one will benefit your company. It will help you establish the structure of your business, the processes to run your company, as well as the responsibilities and rights of your members or managers. This document will also prove that your company is a separate entity and will help preserve the limited liability protection that comes with the structure.
  • Ongoing – The obligations of your LLC do not end after the successful registration with the Secretary of State. For example, you may have to obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). It is necessary, especially if you are planning on hiring employees or opening a business bank account.

Depending on your business activities and your primary place of business, you may have to secure some business licenses and report certain taxes. You also need to submit annual reports, which has a $20 filing fee.

Running your own Connecticut company can be exciting. However, you have to make sure that you are ready to take the different responsibilities that come with it. Knowing the requirements and processes that the state has set can help you prepare.

For some entrepreneurs, it can be hard to deal with the state obligation while focusing on running and growing their companies. If you think you need help from a team of experts, you can leave the registration process to DoMyLLC. We can handle and file the paperwork for you. We can even serve as your registered agent. You can also ask for a personalized solution to ensure that the service we provide fits your company’s needs. Contact us now to find out more about our services.