Do you want to learn how to start a business in Connecticut? Start here with these frequently asked questions, then get work with one of our business mentors to guide you along the way.
What form should I use to carry on a small business?
Most small businesses are organized as either an individual proprietorship or a limited liability company (LLC).
An individual proprietorship is merely carrying on a business in your name (such as Robert Smith Associates) or a made up name (such as Norwalk Consulting), without any formal organization (D/B/A). For tax purposes, this form of business is taxed directly to the owner via Schedule C to Form 1040. Also, the owner is personally liable for all debts and other legal obligations of the business.
A single owner LLC is taxed directly to the owner similarly to an individual proprietorship. A LLC with more than one owner is deemed to be a partnership for tax purposes, but essentially flows through to the individual owners. However, as its name implies, the owner(s) of an LLC are normally not liable for the contractual debts and obligations of the LLC unless the owner(s) agree to guarantee the obligations of the LLC, including signing contracts in their individual names rather than in the name of the LLC. Owner(s) may also be personally liable for negligence and other tortuous actions. If organized and managed properly legal judgments against an LLC are generally limited to the assets contained within the LLC.
Where do I get a business permit?
With an individual proprietorship, you normally register your business name (D/B/A) with the town clerk where you will carry on the business. However, for many types of businesses you may need special licenses or permits to operate. For example, operating a taxi service, automotive repair, hairdressing are just a few examples.
See "How can I find out if I need special licenses or permits for my business?"
How do I form an LLC in Connecticut?
- You may want to reserve a name for your LLC if you are not planning to form your LLC presently. There is a $60 filing fee.
- Or file a form for Articles of Organization which has an initial $120 filing fee and you have to pay an annual fee of about $175-200 to keep an LLC in force. Visit CT.gov
There are companies that for an additional $100-$200 fee will prepare and file Certificate for you (and act as agent for service of process, instead of you, if you are sued). If you act as your own agent for service of process, you have to amend your Articles when you change your address-otherwise, you may not get notice of a lawsuit against the LLC and default.
What if there is more than one owner of the LLC?
In this case, you should have a partnership/company agreement between the owners, in which you agree to ownership percentages, control matters, restrictions on transfer of the ownership and other matters. You will probably need advice and possibly an attorney to help prepare this document.
Where do I get a tax ID number?
An individual proprietorship and a single owner LLC do not need a tax ID number unless they will have employees other than the owner. An LLC with more than one owner needs a federal tax ID number even if it has no employees other than the owners because it is deemed a partnership for tax purposes. A federal tax ID number can be obtained online by visiting IRS.gov or by calling the IRS, which will give it to you over the phone.
Where do I get a sales tax permit?
You need a sales tax permit for the sale or rental of any goods or services. You obtain a sales tax permit through the CT Commissioner of Revenue Services. Learn more at the CT.gov website.
Download the application and be prepared for the $100 registration fee.
Do I need to collect sales tax if I sell online?
If you are selling goods over the Internet and your company has a presence in the state of delivery, your company has established nexus and will be required to register to collect sales tax on all taxable items regardless of method of order placement. At a minimum, retailers will be required to collect tax in their home state – which can be where the company is incorporated or established and also where the owners reside, if different.
Whether the order is placed over the Internet or through traditional means, if a company has nexus in the state to which the product is being shipped, sales tax should be billed, collected, and remitted to the state of the ship to address.
How can I find out if I need special licenses or permits for my business?
The CT Licensing Bureau is the best source. You can do preliminary checking online at ct-clic.com. There may also be U.S. Government special licenses or permits required for businesses, such as those involving import/export, firearms, environmental matters, and food/drugs. The CT Licensing Bureau may be able to provide information on this. A business librarian in your local library may also be able to help you learn what special licenses or permits may be needed.
Do I need insurance?
You will normally want to have liability insurance to protect you and your LLC in case you or the LLC are sued for providing defective goods or services. If you use cars, truck , personal computers or other expensive equipment in your business, you will also want to cover them for theft, fire damage, accident, etc. If you are going to use a personal automobile or have people come to your home for business, you want to make sure that your personal auto and homeowner’s insurance will cover any business risks.
For all of these, a reasonable starting point is the broker or agent you use for your current auto, home or renters insurance. However, having gotten preliminary information from them it is always wise to get other quotes and/or alternative coverages. If your business is part of an industry association, the association may offer insurance, and if so it is often cheaper than you can obtain otherwise.
You may also want to consider obtaining medical and disability insurance, which will normally be tax deductible. An industry association may also offer this at cheaper rates than otherwise.