How to Start a Business in CT in 8 Steps
The state of Connecticut often gets overlooked compared to larger states like New York or California, but there are many reasons why you might consider starting a business in Connecticut. In fact, according to the SBA, over 99% of all businesses in Connecticut are small businesses—employing nearly half of the state’s employees.
That said, with a state that boasts so much entrepreneurship, it’s no wonder why there’s such an appeal to starting a small business in Connecticut.
If you’re ready to start a business in Connecticut, we’ve got you covered. Here we’ll walk you through the steps to take—including registering your business, applying for licenses and permits, and more.
Let’s break it down:
1. Write a business plan.
A business plan is one of the most overlooked aspects of starting a business in Connecticut. Simply put, a business plan is a document that helps you visualize your business goals and strategy.
A typical business plan includes an executive summary of your business, market research, information about your target market, and financial projections. There are plenty of business plan templates that you can use, or to completely streamline the process, there is even business plan software you can use.
If you need more guidance on building a business plan, it might be helpful to contact an accountant or bookkeeper to assist you with financial planning. You can also contact Connecticut’s Small Business Development Centers and get free business counseling or participate in a business plan class.
2. Select an entity type and register your business.
A business is only an idea until you select your legal entity and then register your business. There are a few different legal structures to pick from. Each legal structure has its own benefits and drawbacks, particularly when it comes to taxes and liabilities.
In Connecticut, business registration requirements depend on where your business is located and its legal structure. Here is a brief overview of the most common structures and their business registration requirements:
- Sole proprietorship: The sole proprietorship structure is the simplest legal structure because it doesn’t require formal paperwork or registration with the state. However, sole proprietorships don’t have strong legal protections, as you are held liable for any debts your business incurs. To set up a sole proprietorship in Connecticut, you will need to file a DBA, or “doing business as”, with the town clerk. Sole proprietorships do not, however, need to register with the Connecticut Secretary of State. That said, you’ll also need to obtain the appropriate licenses and permits, depending on where you live. Lastly, you’ll need to get an EIN from the IRS.
- Limited liability company: Also known as an LLC, a limited liability company is a hybrid legal entity that takes features from sole proprietorships and corporations. If you decide to set up an LLC, you’ll need to register your business with Connecticut’s Secretary of State. You’ll also have to file a certificate of organization, which costs $120. You will also need to file an annual report each year. As an LLC, you’ll also need to choose a registered agent who will be responsible for receiving tax forms and corresponding with the government. The registered agent must be a resident of Connecticut. If you’re converting from a sole proprietorship, you will need a new EIN.
- C-corporation: C-corporations are taxed separately from their owners. They must have a board of directors and have annual meetings. When forming a C-corporation in Connecticut, you’ll need to choose a corporate name, file your articles of incorporation with the Secretary of State and pay a $250 fee, as well as appoint a registered agent. Like LLCs, you’ll also need to submit an annual report.
- S-corporation: S-corporations enjoy limited liability protection and tax benefits. S-corporations must have no more than 100 shareholders. S-corporations can also seek outside investments. The process to form an S-corporation is essentially the same as forming a C-corporation. However, you’ll also need to register your tax ID number with the IRS and file a form known as Form 2553, which must be signed by all shareholders.
3. Choose a business name.
Selecting the type of business structure you want can actually help you choose a business name. For example, if you decide to start a sole proprietorship, you probably wouldn’t want to name your business “Jane Doe and Associates.”
That said, when you pick one or two business names that you feel certain about, always double-check to see if that business name is available by searching it on the Connecticut Secretary of State website.
You also should make sure that you can access the name you want as a web domain and on social media platforms. As you scale your business, it also might be worthwhile to look into trademarking your name by registering with the U.S. Patent and Trademark Office.
4. Obtain licenses and permits.
After you’ve finished registering your business, you’ll then need to acquire the proper permits and licenses to operate your business in Connecticut.
Although Connecticut doesn’t require a general business operating license, they do require certain businesses in specific industries to have particular licenses and permits.
You can find these requirements on Connecticut’s Licensing Info Center, which will allow you to search for license types, as well as provide you with a list of required licenses and permits based on your business industry and type.
Finally, even if your business does not plan to have an office or facility in Connecticut, you may have to get zoning or other similar permits (e.g. occupation permits, health permits, constructions permits, etc.)—so this is another local consideration to keep in mind as well.
5. Acquire business insurance.
The next step to learning how to start a business in Connecticut is getting business insurance.
Although state law excludes sole proprietorships or single-member LLCs from needing to purchase workers compensation insurance when they do not have employees, corporations, multi-member LLCs, and partnerships are required to apply for workers compensation regardless of whether or not they plan to hire employees.
That said, although Connecticut doesn’t require any additional insurance by law, the state does recommend that all small businesses look into proper coverage. We’d recommend general liability insurance at the very least.
Depending on what your business does, you might opt to bundle multiple insurance policies—like general liability insurance, commercial property insurance, and business interruption insurance—into a BOP, or business owner’s policy.
To ensure that all your bases are covered, you should speak to a legal professional who can assist you with choosing the right insurance for your business.
6. Register for taxes.
You can’t start a business in Connecticut without officially registering for taxes, otherwise you will incur serious legal penalties.
Connecticut’s state and local tax requirements will depend on your business type. For example, if you plan on selling goods, you’ll have to apply for a sales and use tax permit, otherwise known as a seller’s permit, to collect sales tax from your customers.
You can refer to Connecticut’s Department of Revenue Services to register your business for taxes and apply for a Connecticut tax registration number (TRN).
- Withholding taxes
- Business entity taxes
- Interstate fuel taxes
7. Start hiring.
At some point, you will most likely need to make your first few hires after you’ve established your Connecticut business. To prepare in advance, here are some steps you should familiarize yourself with to help set up your first employees:
- Report every new hire to the state: You have 20 days to register your new employee to Connecticut’s Department of Labor (DOL) from the hiring date. You can register new employees by using the Connecticut New Hire Reporting website or by mailing the required forms to the CT DOL.
- Register for unemployment insurance: You must have unemployment insurance in order to hire new employees. You can apply for an unemployment number through Connecticut’s DOL Employer Registration website.
8. Open a business bank account.
Finally, now that you’ve gone through all of the federal and state requirements involved with starting a business in Connecticut, you’ll want to separate your personal and business finances.
One of the best ways to do this is by opening a business bank account, which will help organize your business’s funds and provide some form of liability protection. When you’re picking the right business bank account, you’ll need to think about how much you want to pay in fees, what type of account you want to open, and what specific features will help streamline your business banking.
Once you have a business bank account, the next step is to get a business credit card. Like a personal credit card, a business credit card can help build your business credit and be extremely useful for covering day-to-day expenses.
The Bottom Line
Opening a business in Connecticut requires planning and preparation.
Ultimately, when you’re starting a business in Connecticut, it’s incredibly important to make sure that you properly register your business, secure the right licenses and permits, and meet any other state and local requirements.
But—once you’ve completely covered all of your bases, you’ll get to move on to the fun part—running and growing your business.