How To Start A Business In Connecticut? – Follow These 7 Concrete Steps

Connecticut is the wealthiest state in America in terms of per capita income and is quite close to both New York and Boston. With great taxation policy, economic development and amazing quality of life, Connecticut has become one of the best places to start a business. If you want to start a business in Connecticut, this article is for you. This step-by-step guide can aid you in setting up your own business.

How to Start A Business in Connecticut?

It is important to have a proper plan in place before you start a business in Connecticut. This blog will cover all the steps that you need to follow to establish your own business, along with the documents in need, background work that you have to do, and much more. 

Step 1: Pick A Business Idea

This has to be the first step in the process of establishing your own business. You need to have a proper business idea. Most successful businesses focus on delivering completely unique products or services. 

But it is not something that is possible all the time, right? You can always focus on bettering the existing product or service, offering better features at affordable pricing. However, you need to know the end goal of your business formation. Making money can be one of your reasons, but it shouldn’t be the only one to set up an entire company and go through entrepreneurship hassles, right?

Have some effective goals and pick a business idea that will align with those goals. You need to do complete research, understand the likelihood of success, and then proceed with the plan. Make sure to know the below-mentioned aspects before you go ahead: 

  • Your Target Customer: You need to know who you are selling to. This is where market analysis comes into the picture. Evaluate how the market is, know your community, and identify the customers whom you are targeting. Examine those customers to know what interests them in the first place.   
  • Projected Profitability: Even if you aren’t making profits in the first few months, eventually, after some time, you have to be at a point where you need to make more than what you are spending on your entire business. Know your expenses (this includes every business expense), the pricing of your product or service, your margin, and what will be the breakeven point. Once you get an idea about all of these, roughly analyze when you reach that breakeven point and make a cash reserve accordingly.
  • Competitor Analysis: If you have multiple plans in place, get a competitor list and understand their current situation, the investments they have raised, the loopholes that you can fulfill, and much more. This analysis will help you understand what you can do better. 

Step 2: Understand Your Locality And Draft A Business Plan

Get an idea of the current situations in Connecticut department. As you have done competitor analysis in the first step, you will know what your competitors are lacking and how you can provide even better services. Create your business plan after gathering all the important business insights. The least you can do is complete the following steps:

  • Name the Business: You need to pick the right name that resonates with your business plan. However, there are certain Connecticut business naming rules that you have to follow. The business name has to be unique, so check if your name has been claimed by someone else already. Also, check whether a domain is available with your business name or not. 
  • Register Your Business Name: Once you choose a certain business name, it is time to register it. Fill out this reservation form and pay $60 to get your business name registered. If you are running a limited liability company, you need to make sure to include it in the business name itself. 
  • Register Your DBA: DBA stands for Doing Business As, and this shouldn’t be the same name that you have registered. This is the name with which customers would address your business. You need to apply with the local town clerk to get a trade name. 
  • Get EIN: EIN stands for Employee Identification Number, and this is given by the IRS. This number helps you while filing taxes. 
  • Pick a Business Location: You need to choose the right location where you are opening your business. Be it a brick-and-mortar store or a simple organization that you are starting right from your home; you need to be clear about this location as it is going to impact your permits and type of licensing. 
  • Curate a Business Plan: Having a well-curated business plan will give you a perspective on various things. You can use this plan to get business funding as well. Some of the must-include components in a business plan are – product development (for product-based companies)/ services offered (service-based companies), sales and marketing plans, staffing, and financial planning.

Step 3: Pick A Relevant Business Structure

Selecting the right structure for your Connecticut business is very important. There are five types of structures, and your business will fall under one of these. Every structure has its advantages. 

  • Sole Proprietorship: This is an informal business structure. A sole proprietorship is an extension of the small business owner, and whatever profits that the owner gains are for them only. However, if there are any losses or debts, the owner stands liable for them as well. Businesses that have minimum risk and very little manpower opt for this type of business structure.
  • Partnership: A general partnership similar to sole proprietorship is an informal business structure with multiple owners. The partners won’t get personal asset protection. There is limited liability partnership where irrespective of the partners, the business continues to exist. 
  • LLC: LLC stands for Limited Liability Company, is a formal business structure, and it offers personal asset protection, which means that the owner’s personal property won’t get affected if the owner gets sued. Businesses with sole owners or partnerships can opt for this type of business structure because of its flexibility. 

There is another business structure that small businesses can opt for if they have more shareholders. Companies with less than 100 shareholders can register themselves as S corporation and their taxing is similar to an LLC. Shareholders are responsible for any losses incurred in this business structure. 

  • Corporation: Connecticut corporation is a separate legal entity and is owned by its legal shareholders. These companies have multiple shareholders, and they are liable for any profit or loss. They have various strict policies, and so many big organizations like Amazon, Google, and Apple fall under this category. There is C corp in which owners are taxed separately from their entity. 
  • Nonprofit: Nonprofit organizations are funded by donors, and are mainly oriented toward social causes. 

Step 4: Get Your Business Registered In Connecticut

Once you are done picking a legal structure, it is time for you to register your organization. This registration format varies from one business structure to the other in Connecticut department:  

Forming LLC In Connecticut

Setting up an LLC is quite simple when compared to other business structures. It requires less paperwork, and you can set it up in five simple steps:

  • Choose a name for your Connecticut LLC.
  • Pick a Connecticut registered agent.
  • File LLC with the state.
  • Create an LLC operating agreement.
  • Get an EIN.

You need to file a Connecticut certificate of organization to set up an LLC in Connecticut. You can either submit the relevant documents to the Connecticut Secretary of State via email or online by paying a $120 fee.

Businesses that are formed in other states and want to establish in Connecticut can opt for foreign LLC. 

Forming Corporate In Connecticut

To avail Connecticut business registration for your corporate, you need to follow these steps: 

  • Name your corporation.
  • Choose a Northwest registered agent.
  • Conduct an organizational meeting with stakeholders.
  • File formation documents.
  • Get an EIN.

Corporations need to get a certificate of incorporation, and for this, you need to file the formation documents to the Connecticut Secretary via email or online by paying a $250 fee.

Form Nonprofit In Connecticut

The steps to establish a nonprofit in the Connecticut department are quite similar to LLC or corporation. You can opt for tax exemption with this nonprofit, which is also known as 501(c)(3) status.

There are simple steps that are involved:

  • Name your nonprofit.
  • Pick a registered agent.
  • Select your board members.
  • Adopt bylaws and conflict of interest policy.
  • File certificate of incorporation.
  • Get an EIN.
  • Apply for 501(c)(3) status.

You need to pay $50 and file for a certificate of incorporation at the Secretary of State via email or online.

Step 5: Open A Bank Account Specifically For Your Business

Opening a separate bank account for your business is very important. This way, you will be able to keep your personal finances separate from your business. You will be able to file taxes at the revenue service easily when you have two different accounts. 

You need to choose the right establishment with whom you want to open a business bank account. Most entrepreneurs opt for banks where they have their personal accounts. This eases out the entire account opening process, and they know how to navigate between things. 

Once you have chosen the bank to open your account, it is time to submit the following documents:

  • Driver’s license.
  • Certificate of Incorporation.
  • Certificate of Organization.
  • Trade Name Certificate.
  • Social Security Number.
  • Federal Employee Identification Number.

It is always a better idea to hire a professional accountant who will help you in the setup process. You need to get a business credit card, which helps in building a credit history for your organization. If you keep on repaying properly, you will get a chance to raise capital and apply for business loans in the future. 

Step 6: Get Your Business Insured

In other states, purchasing business insurance is optional; however, in Connecticut, if you are running a business with more than one employee, you have to get insurance without fail. There are different types of insurance options available in the market. However, some of the most common types that align with various businesses are:

  • Worker Compensation Insurance: If any of your employees gets injured at work, this policy will cover their medical expenses and other associated costs related to the injury.
  • Professional Liability Insurance: This is also known as E&O coverage. This insurance is usually helpful for those who provide consulting services and protects them against any negligence work claims.
  • General Liability Insurance: This is the basic insurance policy that will protect your business from any unexpected risks and events.

Businesses need to ensure that they have the right insurance policy in place to avoid any kind of hassles. You can contact your business accountant to get more details on which insurance would be better. 

Step 7: Obtain All The Required Government Licenses And Legal Documents

It is important to comply with federal, state, and local government regulations to operate your business legally. You need to get a business permit and license before you start the business. In some cases, the number of permits and licenses can be more than one. 

This depends on your business structure and type, for example a restaurant with limited partnership requires permits and licenses from the food regulation committee along with partnership agreement. 

Know about the types of licensing permits you need to start a business in Connecticut and make sure that you obtain all of them without fail. The most important permit that you must need, despite your business type, is a sales tax and use permit. This costs you $100, and you will get a registration number that you can use to remit business entity tax payments. 


Is Connecticut A Good Place To Start A Business?

Yes, Connecticut is a great place to get your business started. It is one of the wealthiest states in America in terms of per capita and is quite close to New York. Cities like New Haven make a great place to establish business in Connecticut. The state is business-friendly, has a moderate taxation policy, a reasonable cost of living, and a great quality of life. The state supports entrepreneurs by providing them with various resources as well. There is a huge scope for business growth in Connecticut.

 How Much Does It Cost To Get A Business License In Connecticut?

Connecticut doesn’t have a general business license at the state level. So, you won’t be paying any tax for that. However, as stated above, there is a sales and permit tax that every business must pay during registration. This costs $100. To operate your business in Connecticut, you need to obtain a municipal-level license or state-level occupational license, and the filing fee for these varies depending upon your business structure and the type of industry you are in. 

Can I Run A Small Business Without Registering?

No, you cannot. It is important for every business, irrespective of its size and structure, to register with the Connecticut state authority. There is no exemption here. Getting your business registered won’t cost you a lot of money, and if you don’t do it, you may end up paying huge amounts as a penalty. So, it is always better to stay safe than sorry, right?

Is There An Annual Fee For An Llc In Connecticut?

Yes, there is a nominal annual fee that every LLC has to pay in Connecticut. This is specifically called LLC annual report fee, and you must pay $80. LLCs submit this annual report mentioning all the relevant updates regarding their businesses. The main purpose of this report is to ensure that your business details are up-to-date at the State of Connecticut so that the creditors and other interested parties can contact you in case they have any issues. 

Does Connecticut Require A Business License?

Yes, a business license is mandatory in Connecticut. You have to apply for a license from the Connecticut Secretary. Every corporation, partnership, LLC, or nonprofit organization will have to get a business license. If you fail to do so, you will be liable to pay a huge fine or penalty.  

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