How to form a Connecticut LLC: What the laws say

One sort of business structure that is well-liked by small business owners is limited liability companies (LLCs). Liability protection is one of the primary justifications for establishing an LLC.

Due to limited liability protection, LLC owners are only liable for the liabilities of the company up to the amount they invested. This has the major benefit that the personal assets of LLC owners are not in danger due to business debts and liabilities.

Similar to how a partnership does, an LLC likewise provides the benefit of pass-through taxation. Pass-through taxes requires LLC owners to record business profits on their personal tax returns.

Compared to corporation taxes, this may be preferable. When paying taxes, corporations may be liable to corporate and personal taxation, and double taxation is the term for this.

What kinds of LLCs can be created in Connecticut?

According to Connecticut LLC laws, your LLC will be a single-member LLC with one owner if you operate as a sole proprietor or lone businessperson. Multi-member LLCs need to be formed if you have more than one owner, and domestic LLCs are created in Connecticut.

An LLC is referred to as a foreign LLC if it is created in another state with the intention of conducting business in Connecticut. The state of Connecticut does not permit anonymous LLCs, which keep members' personal information confidential. You can utilize a registered agent service, nevertheless, to ensure that your contact information is kept private if you are concerned about privacy.

Another business entity choice that offers some liability protection for professionals, including doctors, lawyers, and accountants, is a professional limited liability corporation (PLLC).

How much will it cost you to establish an LLC in Connecticut?

You must submit a Certificate of Organization and the $120 state fee in order to register your Connecticut LLC. A registered agent service will charge a yearly fee if you decide to employ their services. A yearly report and an $80 filing fee will also be needed. Taxes, insurance, leasing payments, payroll costs, supply costs, and marketing may also need to be paid for.

Will you need a Certificate of Legal Existence?

Connecticut LLC law does not make it mandatory to get a Certificate of Legal Existence. But, if you choose to get one, a Certificate of Legal Existence can be obtained at the CT.gov website. One can be required if you want to apply for government contracts or open a company bank account.

What are the requirements for forming an LLC in Connecticut?

You need to submit a Certificate of Organization in order to officially create your Connecticut LLC, according to Connecticut LLC laws. A registered agent must be chosen. You must submit an annual report. Although it is not necessary to register an LLC operating agreement in Connecticut, doing so is still a crucial element of your company plan as it specifies member responsibilities, enables buy-out options, and aids in planning for development.

How to form an LLC in Connecticut

1. Choose a name for your company.

You should select a unique and memorable LLC name if you want your company to stand out from the competitors. The LLC naming guidelines for Connecticut must also be followed.

  1. The phrase "Limited Liability Company" or the recognized acronyms "L.L.C." or "LLC" should be in your company name. You can abbreviate "limited" to "Ltd." and "business" to "co." if you'd like.
  2. Additionally, the name of your business should be distinct from that of other companies that are currently listed with the Connecticut Secretary of State.

You should search the Connecticut Secretary of State's website to see if the name you want is available in Connecticut. You will need to choose an alternative name if another company is currently using it. You should keep looking if your name hasn't been registered by any other Connecticut companies.

A searchable trademark database is available from the U.S. Patent and Trademark Office (USPTO). You must confirm that your business name does not already exist in this database in order to avoid violating another company's trademark.

2. Choose a Connecticut registered agent

You must choose a registered agent before forming an LLC in Connecticut. A person or organization designated as a registered agent consents to receive legal documents on behalf of the company. If your LLC gets sued, the service of process is also included.

According to Connecticut LLC laws, one of the following may serve as your registered agent:

  1. A full-time Connecticut resident. They can be manager or a member of an LLC.
  2. A business registered in Connecticut.
  3. A foreign business with a certificate of authority authorizing them to conduct business in Connecticut can also be your registered agent.
  4. The company or person serving as your registered agent must be physically located in Connecticut. Just a P.O. box won't do.

You might think about using a registered agent service if none of the LLC's members are willing to serve as registered agents. You can pay a different person or company a fee to accept legal documents on behalf of your company by using a registered agent service. By performing a quick online search, you can find a variety of choices for this service with ease.

3. File a Certificate of Organization.

You will need to file a Certificate of Organization with the state and pay a filing fee of $120 in order to establish an LLC. This is called the Articles of Organization in many other states. A Certificate of Organization presents your business's essential information to the state of Connecticut.

Your Certificate of Organization should contain the following:

  1. The address and name of your company (LLC)
  2. The address and name of your registered agent.
  3. You have to include the name of a member or a manager of your organization.
  4. It also needs to be stated whether the LLC is member-managed or manager-managed.

The website of the Connecticut Secretary of State allows you to submit your Certificate of Organization electronically. You will have to log in or make a new account there. You can file by mail if you'd like. If you submit your paperwork online, you should write down your login information. These might be used later on to submit the annual report for your LLC.

4. Make an Operating Agreement.

Although operating agreements are not required by Connecticut LLC law, having one is a good idea. The Certificate of Organization should not be confused with an LLC operating agreement. Similar to corporate bylaws, the LLC operating agreement is a contract between the members of your LLC. You won't file this internal document with the state.

The Operating Agreement will deal with the following:

  • Rights of members and their responsibilities.
  • Voting rights.
  • How the LLC can be dissolved.
  • Percentage ownership.
  • Any other issues or agreements.

An operational agreement encourages your business's activities to be more organized. Additionally, it might aid in preventing future disputes among participants. Even one-member LLCs need operating agreements.

Even though single-member LLCs don't have to worry about member disputes, an operating agreement helps to give their limited liability status more legitimacy. Additionally, you might need to provide this document to specific professionals in order to get services for your company.

5. Obtain an EIN or Employer Identification Number

The Internal Revenue Service (IRS) assigns each employer an individual number known as an Employer Identification Number (EIN). Identification of your business is beneficial, particularly for tax purposes, and it can be compared to the commercial equivalent of the Social Security Number.

You must obtain an EIN unless your LLC just has one member and no employees. To file taxes, pay staff, create a business bank account, and apply for business credit cards, you will need your EIN. The IRS accepts applications for free EINs via mail, fax, or internet submission.

6. Fulfil the licensing and tax criteria

Your tax and license requirements will change depending on where you do business and what kind of business it is. You might need business licenses from the city, the state, or the federal government.

  1. Licensing requirements

    Visit the Small Business Administration (SBA) website if you think you might require a federal license. The types of businesses that are required to submit applications for federal licenses are covered in detail there.

    Visit Connecticut State's online License and Permit Center to find out more about the licensing requirements in your state. Contact your county or city clerk if you need any local permits.

  2. Tax requirements

    You should be sure to file your taxes appropriately and on time to prevent further legal issues and audits. You will be required to pay both self-employment tax and personal income tax under federal law. On the IRS website, you can find detailed information regarding your federal tax liabilities.

    You should go to the Connecticut Department of Revenue Services website to find out more about your state tax responsibilities. The kind of business you own will affect the state taxes you pay.

    For instance, you might have to collect sales taxes if you're selling things. Additionally, you must register for withholding taxes if you have employees.

7. Submit your yearly LLC reports

You must send the Secretary of State an annual report to maintain the good standing of your Connecticut LLC. The essential details regarding your LLC are verified in an annual report. This contains information on the LLC's name and address, registered agent information, and other essential facts.

This will resemble your Certificate of Organization information quite a bit, you will discover. Every year, between January 1 and April 1, Connecticut LLC annual reports are required to be filed. Before April 1st of the year after the year your LLC was formed, you will file your first one. To remind you of this, the Secretary of State's office will send you a postcard or an email about a month before the due date for your report.

You can file your annual report at the following website: Ct.gov

Conclusion

You will be able to open a business bank account as soon as you've obtained an EIN. To organize your money at tax time and prevent the commingling of funds, you must have separate accounts for your personal and business banking. Combining finances can not only complicate your taxes but also be used against you in court if someone argues that you and your LLC are not really different legal entities.

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