Connecticut is home to approximately 532 corporations, with 29 listed on the Fortune 1000 list. Starting a corporation in Connecticut comes with many benefits. First, your corporation is recognized as a separate entity from its owners.
Therefore, owners have liability protection in regard to obligations and debts. Additionally, only the assets belonging to the corporation may be used to pay off creditors.
The following step-by-step guide will show you how to start a corporation in Connecticut.
1. Select a name for your corporation
Irrespective of what type of business structure you choose, deciding on a name for your corporation is a pertinent step in the process.
General corporate name guidelines
Additionally, your corporation name must adhere to the Connecticut corporation naming guidelines below:
- Your Connecticut corporation name must not include words that could confuse your corporation with any government agency
- Your Connecticut corporation name must be significantly different or distinguishable from other businesses registered in the state
- Your corporation’s business name should not contain any language that implies that the corporation is formed or created for any other purpose other than what is permitted in the Articles of incorporation
- Your Connecticut corporation name must include the following abbreviations or words: Corp., Inc., CO, S.p.A, Ltd, corporation, company, Inc., Societa per Azioni, or limited
For additional corporation naming requirements, refer to the Connecticut state statute.
If you want to keep other business entities in the state from using your business name, then you should register a trademark. It’s a straightforward process, and you can file an application online with the US Patent and Trademark Office’s website. However, you’ll want to refer to the Trademark Electronic Search System Database to ensure that no other business entity is already making use of that specific business name.
Your Connecticut corporation’s entity name is the legal name of your business. This is the name that is included or stated on all your formation documents.
DBA (Doing-business-as) name
Any business entity in the state of Connecticut that decides to do business under a different name other than the one stated on their tax returns will have to file for a DBA, which is a doing business as name. In other words, you need to file for a trade name certificate. Trade name certificates are filed with the town clerk in the town where you are doing business and not with the Connecticut Secretary of State.
2. Nominate a registered agent
Every Connecticut corporation is required to nominate an agent for service of process in the state. A statutory or registered agent is an individual who agrees and consents to accept legal documentation on the corporation’s behalf.
Some of the requirements that a statutory agent must meet prior to being nominated include:
- The agent must be at least 18 years of age or older
- The agent must have a physical street address and not a P.O. Box address in the state of Connecticut
- The agent must maintain availability during business hours
- The agent must consent to the appointment
In the case of small corporations or small businesses, a director or officer is typically named as the corporation’s registered agent.
It is also possible to nominate a different agent at a later stage.
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3. Appoint initial directors at the organizational meeting
An essential step in forming a corporation in Connecticut includes holding an organizational meeting and appointing a board of directors. The person who signs the articles or the incorporator is responsible for nominating initial corporate directors of the board. These directors will serve until the first annual meeting of shareholders.
Additionally, the incorporator needs to fill in and sign an incorporator statement that discloses the names and addresses of the initial directors. The statement does not need to be filed with the state of Connecticut; however, it must be kept in the corporation’s records book.
During the first organizational board meeting, directors are tasked with:
- Appointing corporate officers
- Selecting a corporate bank account
- Adopting bylaws
- Authorizing the issuance of shares of stock
- Deciding on the corporation’s financial year
- Approving a proper stock certificate form
The director’s actions should also be recorded in corporate minutes that are prepared by the incorporator or any of the directors on the board.
4. File Articles of Incorporation
In order to officially or legally form your corporation in Connecticut, you’ll need to file the Connecticut Certificate of Incorporation, often referred to as the Articles of Incorporation. The Certificate of Incorporation officially marks the creation of your business.
The Certificate of incorporation should include some basic information regarding your corporation, such as:
- The names and addresses of incorporators
- The number of shares the corporation is going to issue
- The name, physical address, and signature of the corporation’s registered agent
- The corporation’s name and physical address
Once you’ve compiled the Articles of Incorporation, you may go ahead and file it online with Connecticut’s CT Business One Stop Portal. Alternatively, feel free to download the Certificate of Incorporation Form and mail it to the following address:
Business Services Division
Connecticut Secretary of the State
PO Box 150470
Hartford, CT 06115-0470
5. Create and approve bylaws
A corporation’s bylaws do not need to be filed with the state. However, they function as a corporation’s internal management handbook and are essential to all Connecticut corporations. Bylaws essentially lay out the basic ground rules for running the company and ensure that all members of the corporation are clear about what is required.
Additionally, compiling bylaws for your Connecticut corporation will help you reveal to creditors, banks as well as the IRS that your corporation is indeed legitimate. Bylaws should be kept in the corporate records book for reference as and when needed.
6. Select a share structure
The distribution of the share capital is ultimately what determines the ownership structure of a corporation. Additionally, it also determines the rights attached to the shares thereto. For example, a corporation that issues one share of stock to the shareholder or stock owner means that it’s given the stock owner 100% of the corporation.
Additionally, shares may be structured into classes, with each class termed a share class and holding a different set of rights and privileges. In the state of Connecticut, you are allowed to indicate whether the corporation is going to issue more than one share class or series in your corporation’s Certificate of Incorporation.
7. Obtain an EIN
Every business entity in the state of Connecticut, irrespective of business type must have an Employer Identification Number. This is also referred to as an EIN or Federal Tax Identification Number. The EIN is assigned by the IRS to all business entities and serves as a form of identification for businesses in the state.
The EIN is useful in various instances such as:
- Hiring employees
- For federal and state tax purposes
- Opening up a business bank account
There is no cost or fee involved in obtaining an EIN from the Internal Revenue Service. You may choose to apply for your EIN online or alternatively download the IRS Form SS-4 and submit it to the following address:
Internal Revenue Service
Cincinnati, OH 45999
8. File Connecticut state taxes
Connecticut corporations may be liable for the following state taxes:
- Corporate income tax: All corporations that register as a C corporation in Connecticut must pay corporate income tax, also referred to as corporation business tax in the state.
- Business entity tax: Depending on the nature of your business or your business structure, you may be liable for Connecticut business entity tax.
- Connecticut employer tax: If you plan on hiring staff or having employees, then you need to withhold and pay employee income taxes to the Department of Revenue Services.
- Unemployment insurance tax: You may also need to register and pay state unemployment insurance taxes. All unemployment insurance taxes are handled through the Connecticut Department of Labor, and you can register for these taxes online with them.
- Sales and use tax: If you plan on selling goods or services to customers in Connecticut, then you need to collect and pay sales tax. You need to register with the Department of Revenue Services and then make periodic sales tax payments for goods sold.
9. Connecticut business licenses and permits
You may need to obtain the following licenses and permits to legally conduct business in the state of Connecticut:
- Connecticut business license: All companies that intend on doing business in the state of Connecticut must apply for the Connecticut business license. This license is issued by the state. However, there are other business licenses issued by the local and the federal government as well.
- Sales and use tax permit: If you plan on engaging in sales, rental, or the lease of goods, then you need to obtain a sales and use tax permit from the Connecticut Department of Revenue Services.
- Reseller’s permit: In order to obtain a seller’s permit to resell goods or services, you must already be registered to collect sales tax in the state.
10. Annual report requirements in Connecticut
All Connecticut corporations are required to file an annual report. Annual report fees are set by statute; the fees vary based on the entity type. In order to file an annual report, log on to the Connecticut state’s office website.
11. Costs of starting a corporation in Connecticut
The filing fees below apply to all Connecticut corporations:
- Name reservation: $60
- DBA name: $10
- Articles of Incorporation: $250
- Annual report: $150
- Connecticut Certificate of Good Standing: $50
Next steps after forming a corporation
There are a few steps that you’ll need to complete after forming your new business or C corp in Connecticut.
Open a business bank account
With your EIN in hand, you can open a business bank account. This means you can accept payments and checks in your business name as it is considered a separate legal entity. It’s also a legal requirement to keep your personal and business finances separate, as it protects your personal assets. It’s also a good idea to apply for a credit card for your business as it will streamline your record-keeping for business expenses and also help build a credit history for your corporation.
Keep your Connecticut corporation compliant
Depending on the type of corporation you’ve opted for, you may have personal liability protection. However, this does not mean that you don’t need to keep your business in good standing. Failure to keep your business in good standing means you could lose this liability protection. So ensure that you understand exactly what’s required to keep your corporation compliant each year. Filing annual reports with the state each year, keeping personal and business finances separate, and keeping up with your business’s federal and state taxes are all required by Connecticut corporations.
There are quite a few options when incorporating in the state of Connecticut. You may register your business as a sole proprietorship, partnership, limited liability company, or corporation. Each of these options comes with a specific type of liability protection, financial benefits, and tax advantages.
One of the easiest business structures to register in the state of Connecticut is a sole proprietorship. This is because it is a simple legal structure to set up and with low costs involved for license fees and business taxes.
Professional and occupational licenses cover people who work in various fields. For additional information on whether your corporation needs this license, refer to the Occupational and Professional Licensing Division of the Department of Consumer Protection.
Once you’ve filed the relevant paperwork with the relevant government agencies, you still need to open a business bank account, apply for business insurance, and learn more about state reporting and tax requirements to keep your business compliant.
When registering a C Corporation, every shareholder must report federal and state taxes due on the share of income received on their personal tax return. Additionally, federal and state taxes must be reported by C corporations on any revenue on the corporate tax return. This is known as double taxation.