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How to Incorporate in Connecticut vs. How to Start a Connecticut LLC

A Guide to Choosing the Best Business Entity in Connecticut

Starting a business in Connecticut can be a big step into the unknown, and one of the first decisions to make is which legal structure is best for your business. Most entrepreneurs form either a Limited Liability Company (LLC) or a corporation. This Connecticut incorporation and formation guide will help you to understand both the Connecticut LLC and Connecticut corporation business entities. We’ll go in-depth on the details of starting an LLC and a corporation in Connecticut, and the advantages and disadvantages of both structures.

After determining which business structure is best suited for you, you can hire Active Filings to take care of the incorporation process for your small business. We’ll streamline the process and make it painless, and know you’ll understand quickly why Active Filings is America’s most reliable business incorporation service.

Hire us to form your LLC or Corporation in Connecticut!

LLCs vs. Corporations

Here are the main characteristics true of all LLCs and corporations to start your decision-making process:

  • Maintenance

Maintaining a corporation requires a high level of maintenance. Corporations are strict, and have legal obligations on duties like electing a board of directors, holding shareholder meetings, and maintaining internal records such as meeting minutes and stock issuance. On the flip side, LLCs only require a minimal amount of maintenance. LLCs require little paperwork, have flexibility in decisions, and low annual upkeep. An LLC will be the best choice if you have a small to medium-sized business and will need a low amount of maintenance.

  • Tax structure

The LLC requires less tax-related paperwork since its not a separate taxable entity from its owners and members. LLCs are pass-through tax entities, where income and losses pass through the business and onto the members to report on their personal income tax return. For higher income LLCs, the tax rate is usually lower than a corporation. Corporations default to a tax structure called a C corporation, but can potentially elect an S corporation tax status if it’s more beneficial. The C corporation is known for what’s called double taxation, where a business’s net income is taxed initially by a corporate tax, and then taxed again on personal income, after shareholders receive their profits and losses (dividends). C corporations typically have tax deductibles such as travel and health care, and and can retain its earnings to be reinvested into the company’s growth. When you elect an S corporation tax status, your corporation becomes a pass-through entity, and is allowed tax advantages such as dividends not subject to self-employment tax.

  • Investors

Corporations are significantly better at gaining investors. Investors are more comfortable handing money over to a familiar and reputable business structure like a corporation. Investors don’t have to worry about complicating their personal taxes when they invest in a corporation, and only get taxed on profits actually distributed to them. Investors view corporations as a dependable business structure that will provide them with a return on their investment. Having a corporate structure will profoundly impact the ability to raise investment money. In contrast, investors can own a percentage of an LLC. Owners of LLCs will have to pay taxes on their distributive shares, even if they haven’t received a distribution on those profits, and can’t issue stock, which is a turn-off for many investors. Consider a corporation if you are serious about gaining investors.

  • Title Prestige

Putting the “LLC” or “Inc” ending on your business name will give it a level of prestige. These endings convey permanence and encourage trust from potential investors or clients. The appearance of a business starts with its name, and while both entities provide a level of prestige, incorporating provides a higher level of prestige for your business, since the corporation is the oldest and most traditional entity type. Keep in mind the LLC has surpassed corporations in popularity in most states, and their prestige can only continue to grow.

 

CT LLCs vs. CT Corporations

Now that we’ve walked through the main characteristics between LLCs and corporations, next is to dig into specifics of why a Connecticut LLC or Connecticut corporation would be better for your business. Each state has its own set of statutes and tax laws that govern the way its businesses operate, and these unique details should be taken into consideration when choosing your business entity. The information in this section will provide these specifics for the Connecticut LLC and the Connecticut corporation.

  • Connecticut Corporate Business Tax
    Connecticut’s corporation business tax is a flat tax imposed on C corporations that carry on business or have the right to carry on business. Connecticut imposes one of the highest corporate tax rates in the nation, although the rate is most similar to its surrounding states, making it appear more reasonable. A flat tax can also be tougher on smaller or low-income businesses than a progressive tax. If you plan to start a corporation, it is crucial to examine these taxes closer to ensure it would be a safe bet for your business.

Corporations have to pay the greater of the following options:

a 7.5% corporate business tax (8.25% after a 10% surtax)
3.1 mills (mills are the amount of tax payable per dollar of the property value) per dollar of a corporation’s capital holdings
a $250 minimum

  • Connecticut Business Entity Tax
    The Connecticut business entity tax, or BET, is a biennial tax imposed on all limited liability entities with the exception of C corporations. This tax is currently a flat $250. All limited liability entities, with the exception of the C corporation, are subject to Connecticut’s business entity tax. Most states impose some sort of entity level tax on these limited liability entities, whether its labeled an excise, franchise, or privilege tax, and they should be considered if you are thinking of forming an LLC. This biennial BET imposed by Connecticut is lower and less frequent than most states, and should be not a concern against a potentially forming an LLC.
  • Connecticut Personal Income Taxes
    Below are the personal income tax brackets in Connecticut for single filers:
Single Tax Bracket Single Tax Rate
$0 – $9,999 3%
$10,000 – $49,999 5%
$50,000 – $99,999 5.5%
$100,000 – $199,999 6%
$200,000 – $249,000  6.5%
$250,000 – $499,999  6.9%
$500,000.00+  6.99%

Much like corporate taxes, Connecticut’s personal income taxes are some of the highest in the nation. As with the taxes on corporations, examine these personal income tax rates and how it could potentially affect your business if you’re considering an LLC.

 

  • Connecticut LLC Events of Dissociation
    A unique statute for Connecticut LLCs involve “events of dissociation”, or events that cause a person to no longer be a member of an LLC. These events include an LLC member transferring rights or benefits to a creditor, filing a petition for bankruptcy, or failing to contest a petition seeking his or her dissolution. This statute is a positive for an LLC by helping protect the business from takeover by creditors, and giving the LLC more control.

Connecticut LLC or Connecticut Corporation? Final Answer.

The answer to form either an LLC or corporation for your business comes down to considering the size of your business, level of maintenance you can handle, priority of investors, and the most sensible tax structure for the future of your business.

The Connecticut LLC is the user-friendly solution for small to medium-sized businesses. LLCs in this state are less expensive and time-consuming to form and maintain than corporations, and provide easy management, flexibility and liability protection. Connecticut LLCs stay true to design in their low maintenance and simpler tax structure. If investors are not one of your top priorities, and you’re looking for liability protection for your business, the LLC is your answer.

The Connecticut corporation is the answer if your business will be growing substantially and investors will be key for that growth, and you have the means for the amount of paperwork required. A Connecticut corporation remains true to character in its extra paperwork, steps to start and maintain, and complex yet beneficial tax structure.

How to Incorporate in Connecticut

Forming a corporation in Connecticut, also known as incorporating, can be accomplished in Connecticut by filing the Certificate of Incorporation with the Connecticut Secretary of State.

Filing the Connecticut Certificate of Incorporation

There are three methods of filing for your Certificate of Incorporation:

  • Online at the Connecticut Secretary of State website (recommended)
  • By postal mail
  • In person at the Business Services Division

When filling out your Certificate of Incorporation with a paper form, you will need your registered agent to sign the form as well. When filing online, you will need your registered agent to accept responsibility via clicking an emailed link to complete the filing process.

Please note: Connecticut corporations changed their corporation language in July 2017, from “Articles of Incorporation” to “Certificate of Incorporation” and “Statutory Agent” to “Registered Agent“.

How much does it cost to incorporate in Connecticut?

There is a $250 filing fee to file your Certificate of Incorporation. This fee covers the filing of your articles as well as the franchise tax (up to 20,000 shares) that must be paid upon incorporation. If your corporation authorizes more than 20,000 shares, you must pay extra on the franchise tax calculated at 1/5 to 1/2 cent per share.

Within the first 30 days of incorporating, you will also need to file an Organization and First Report form for a $150 fee.

If you’d like to expedite your incorporation filings, you can pay a $50 fee and the filing will be done within 24 hours of its receipt by the Connecticut Secretary of State. Otherwise, the processing time in Connecticut is two days.

To complete your Connecticut Certificate of Incorporation, you need to include the following information:

Your Connecticut corporation’s name must contain designations such as:

• Corporation

• Incorporated

• Company

• Limited

• Societa per Azioni

• Corp.

• Inc.

• Co.

• S.p.A.

• Ltd.

Your corporation’s designations may also contain words or abbreviations of like import in another language. Your corporation’s name must be distinguishable from the names of other business entities already on file with the Secretary of the State. Names may be checked for availability by searching the Secretary of the State business name database.

State the total number of shares the corporation is authorized to issue, the class of the shares, and number of shares per class. In the technology industry, larger numbers of shares are more common, such as 10 million. Other industries use much lower numbers, such as 1,000 – 1,500 shares.

List the distinguishing designations of classes and their preferences and limitations.

The Secretary of the State will notify you at this email address when your annual reports are due.

Reserved for the name of your Connecticut registered agent (the address will already be on file). All Connecticut corporations are required by law to have a registered agent physically located in the state to accept service of process on behalf of the corporation. This can also be an individual Connecticut resident, in which you will need to put their street and mailing address.

If you hire Active Filings to form your Connecticut corporation, we’ll provide a year of registered agent service for no additional charge and track all required maintenance filings to keep your corporation active, as well as provide a bevy of free online tools in your online Active Filings account.

This category only needs to be selected if your corporation plans to be a benefit corporation.

If there is any information you would like and are permitted to provide (outside of required information), place it here.

This document must be executed and signed by one or more incorporator, and all incorporators must have physical addresses to list here.

How to Start an LLC in Connecticut

Forming an LLC in Connecticut can be completed by filing the Certificate of Organization with the Connecticut Secretary of State.

There are three methods of filing for your Certificate of Organization:

  • Online at the Connecticut Secretary of State website (recommended)
  • By postal mail
  • In person at the Business Services Division

Unlike a corporation, you will not need your registered agent to sign your Certificate of Organization or click an acceptance link as part of the filing.

Please note: Connecticut corporations changed their LLC language in July 2017, from “Articles of Organization” to “Certificate of Organization” and “Statutory Agent” to “Registered Agent“.

How much does it cost to form an LLC in Connecticut?

There is a $120 filing fee to file your Certificate of Organization. If you’d like to expedite your LLC formation filings, you can pay a $50 fee and the filing will be done within 24 hours of its receipt by the Connecticut Secretary of State.

To complete the Connecticut Certificate of Organization, you must include the following information:

Your Connecticut LLC’s name must contain designations such as:

• Limited Liability Company

• Limited Liability Co.

• Ltd. Liability Company

• Ltd. Liability Co.

• LLC

• L.L.C.

In your designation, limited may be abbreviated “ltc” and company may be abbreviated “co.” Your LLCs name must be distinguishable from the names of other business entities already on file with the Secretary of the State, and can’t include words that suggest your business may be a bank, insurance company, or corporation. Names may be checked for availability by searching the Secretary of the State business name database.

Give the street address of the principal office for your LLC.

This mailing address for your LLC can be a P.O. Box.

Give the name of your registered agent, or the name and address of the individual acting as your registered agent. Connecticut law requires you to have an individual or business entity physically located in the state other than your LLC to be appointed to accept legal process on behalf of your LLC.

If you hire Active Filings to form your Connecticut LLC we’ll provide a year of registered agent service for no additional charge and track all required maintenance filings to keep your corporation active, as well as provide a bevy of free online tools in your online Active Filings account.

You must list the name, title, business, and residence address of at least one member or manager of your LLC. You can attach a separate sheet of paper listing more people if you’d like.

This email address will be used by the Secretary of the State for when annual reports for your LLC are due.

The organizer must sign and print their name. The LLC itself may not be its own organizer, but a member/manager of the LLC can be.

Connecticut Annual Report

To maintain your good standing each year for your LLC or corporation in Connecticut, you will need to complete a couple maintenance tasks with the state:

  1. File your annual report
  2. File your Connecticut business taxes

Below, we’ve listed the instructions and resources you’ll need to help you complete your annual maintenance.

What is a Connecticut Annual Report?

Your Connecticut business must file an annual report every year to confirm or update the Secretary of State on your business’s organizational or contact information such as officers, directors, or registered agent.

How do I file an annual report in Connecticut?

Corporations and LLCs must file their annual reports online at the Connecticut Secretary of State website.

How much does it cost to file an annual report in Connecticut?

The cost to file an annual report is $150 for C corporations, and $20 for LLCs.

When are Connecticut annual reports due?

Annual reports for Connecticut LLCs are due every year anytime between January 1st and March 31st. Your first annual report will be due the calendar year following your LLC’s year of formation.

Annual reports for corporations are due on or before the end of the anniversary month of incorporation. Your first annual report will be due the calendar year following your corporation’s year of formation.

If your annual report is late, there is no penalty fee, but your business will fall out of good standing with the state and may inhibit your ability to do business or be administratively dissolved.

What is a Organization and First Report Form?

Within the first 30 days after business formation, after your business has held its first organizational meeting, you must file the Organization and First Report form with the Connecticut Secretary of State. This report will confirm organizational and contact information, such as principal office and director names.

Connecticut Business Taxes

Connecticut’s business taxes are involved. For corporations, the state imposes a corporate income tax, which the state refers to as the corporation business tax. For LLCs, the state imposes a business entity tax (BET), which is a biennial, flat rate.

The filings are complicated and you may need the help of a tax service or CPA to complete these requirements, but regardless of your accounting skills, we’re here to help get you started.

Take a look at our Connecticut Business Tax FAQ below:

Connecticut Business Entity Tax

What is the Connecticut Business Entity Tax (BET)?

The Connecticut business entity tax, or BET, is a biennial tax imposed on all limited liability entities with the exception of C corporations. This tax is currently a flat $250.

Who has to pay the Connecticut Business Entity Tax?

All limited liability entities, with the exception of the C corporation, are subject to Connecticut’s business entity tax.

What tax forms do I need to file for the Connecticut Business Entity Tax?

Use Form OP-424 when filing your BET.

How can I file the Connecticut Business Entity Tax?

You can file the BET tax forms through postal mail or online at the Taxpayer Service Center through the Connecticut State Department of Revenue Services website.

Connecticut Corporation Business Tax

What’s the Connecticut corporation business tax?

Connecticut’s corporation business tax is a flat tax imposed on C corporations that carry on business or have the right to carry on business.

Connecticut corporate business tax is 7.5%, and there is a surtax of 10% (bringing the real corporate business tax rate to 8.25%) for companies whose total income equals or exceeds $100 million, or who file as part of a combined unitary group. However, if 3.1 mills (mill rate is the amount of tax payable per dollar of the assessed value of a property) per dollar of your capital holdings equals a greater amount than 8.25% of your net income, you will have to pay that greater amount.

There is a $250 minimum required on this tax as well, in which the surtax does not apply.

What tax form does a Connecticut corporation need to file?

A Connecticut C corporation will need to file Form CT-1120.

How can I file the Connecticut corporation business tax?

All corporation business taxes must be filed and paid online at the Taxpayer Service Center through the Connecticut State Department of Revenue Services website.

What tax forms does a Connecticut LLC need to file?

Use Form CT-1065/CT-1120SI for your LLC.

What’s the personal income tax rate in Connecticut?

Below are the personal income tax brackets in Connecticut for single filers:

Single Tax Bracket Single Tax Rate
$0 – $9,999 3%
$10,000 – $49,999 5%
$50,000 – $99,999 5.5%
$100,000 – $199,999 6%
$200,000 – $249,000  6.5%
$250,000 – $499,999  6.9%
$500,000.00+  6.99%

When are my business tax returns due?

The Connecticut BET is due by April 15th of every odd year. For example, the last BET was due April 15th, 2019.

The Connecticut Business Tax is due on or before the 15th day of the month following the due date of the federal return, or May 15th for calendar year taxpayers.

Hire us to form your LLC or Corporation in Connecticut!