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Deciding to start a corporation can be overwhelming. There are countless articles online explaining pieces of the puzzle, but it’s hard to piece everything together. In this guide, we’ll cover the basics of incorporating your business in Connecticut. First, let’s review corporation types.
There are three common corporation types: C corporations, S corporations, and nonprofit corporations. In a C corporation, taxes are paid at both the corporate and individual level (known as “double taxation”).
An S corporation avoids this double taxation issue with a C corporation and allows income to pass through to owners’ personal income without corporate tax rates. However, a C corporation can be better for getting investors to raise capital because S corporations are limited in their number of shareholders.
Nonprofit corporations, on the other hand, can avoid taxation, as they can get a special exemption from the IRS. All of these corporation structures need to follow strict organizational rules and record all earnings.
We’ll walk you through everything you need to know about forming Connecticut corporation, offering key insights and tips along the way.
The rules and regulations for incorporating your business vary from state to state. In this guide, we’ll cover the specific steps and guidelines that you must follow to incorporate your business in Connecticut. To start a corporation in Connecticut, you must file a Certificate of Incorporation with the Secretary of State.
To simplify the process of forming a corporation in the state of Connecticut, we’ve put together 10 easy steps to form your business:
The first step to starting a corporation in Connecticut is to name your corporation.
In the state of Connecticut, corporations cannot have any language that implies that the corporation was organized for a purpose other than permitted in the articles of incorporation. All corporation names in Connecticut must include one of these words or their abbreviations:
The Connecticut Secretary of State offers a business registry search service to ensure that your corporation name is available in the state. You can search here to see if the name is available. If the name is available, but you’re not quite ready to register your business, you can choose to reserve the corporation name on the Secretary of State’s website. Submitting an application requires a filing fee of $60. You’ll need to mail the form to:
Commercial Recording Division
Connecticut Secretary of the State
P.O. Box 150470
Hartford, CT 06115-0470
You may also deliver it to:
Commercial Recording Division
Connecticut Secretary of the State
30 Trinity Street
Hartford, CT 06106
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It might also be prudent to look into registering a trademark and “doing business as” name. Registering a trademark prevents others in the same or a similar industry from using your trademark. And a trademark at the federal level can offer broader protection, especially for businesses planning on doing business outside of Connecticut.
Even if you choose not to trademark your corporation name at the federal level, your corporation is still subject to trademark infringement lawsuits, so it’s important to check the federal trademark database to ensure your corporation name doesn’t violate any trademarks.
State trademarks are usually a lot easier to obtain. However, having your corporation name trademarked in Connecticut would only protect your corporation name in the state. You can check if a trademark is available in Connecticut online. If it is, you can fill out an Application for a Certificate of Registration of a Trade or Service Mark, which can be done online or mailed.
A “doing business as” (DBA) name doesn’t provide legal protection; it’s just a different name for your business. To use a DBA in Connecticut, you will need to register your DBA name with the county clerk. DBA names are useful for a corporation that wishes to run its business under a different identity than what is registered officially. DBA names tend to come with more leniency and less restriction, as multiple businesses can have the same DBA name in the state.
All corporations have appointed directors who act as the corporation’s governing body. Overall, they manage the corporation’s business and are responsible for ensuring that its activities are running smoothly.
Directors can be virtually anyone in the corporation. For instance, an owner might be a director. In Connecticut, every corporation must have at least one director, but there are no restrictions on who can serve as a director unless stated in your bylaws.
Depending on the size and structure of a corporation, the board of directors can create committees with appointed members. All in all, the board of directors can vary from corporation to corporation, making it extremely important to set rules or restrictions for the board in the Articles of Incorporation or bylaws.
Connecticut requires that every corporation have a registered agent. A registered agent works as the point of contact for your corporation if it must be reached by the Secretary of State or a similar government body. The agent also receives legal notices, such as service of process for a lawsuit.
The registered agent must be a full-time resident of Connecticut or a business authorized to do business in the state. The agent must also have a street address in Connecticut (P.O. boxes are not sufficient).
You can be the registered agent for your corporation in Connecticut; however, that is not always recommended. To qualify as a registered agent, one must be available during business hours, able to be served any legal notices, and capable of quickly relaying any legal documents to the correct people in the corporation.
Connecticut requires that businesses file the Certificate of Incorporation.
This form must include the company’s name, number of authorized shares, number of shares per class, class, and the terms for each share. You should file the Certificate of Incorporation in the state that you perform business activities, or that corresponds with your business location.
Once you have the required information for the Certificate of Incorporation, you can file online or by mail. If you file by mail, you will need to print this PDF and fill out the form. To file the Certificate of Incorporation, you will need to pay a $250 fee (which is the same if you file online). After you’ve made the check payable to the Secretary of the State, send the finished Certificate of Incorporation to this address:
Business Services Division
Connecticut Secretary of the State
P.O. Box 150470
Hartford, CT 06115-0470
Although Connecticut does not require corporate bylaws, it’s still a good idea to have them. When done correctly, corporate bylaws can explain everything from your corporation’s leadership structure to the shareholder agreement. Bylaws should be specific and outline operational procedures and standards for every owner of the corporation to follow. Additionally, they dictate the duties of the corporation’s directors and officers.
Bylaws should include:
Corporate bylaws can be tedious to create, especially if it’s your first time creating them. Using a corporate bylaw template can help ensure that your corporation outlines some of the most critical information.
A shareholder agreement provides shareholders with the opportunity to settle disputes and compromise on critical decisions within the corporation. A well-written shareholder agreement should prevent future arguments from escalating into anything more than simple disagreements. Simply put, a shareholder agreement outlines shareholders’ rights and obligations in the corporation.
In addition to a business plan that should have a unified vision, a shareholder agreement should include:
Issued shares are the authorized shares that are sold and held by company shareholders. Corporations can only issue a share once. After it is issued, investors can sell the share to other investors.
Issued shares must be recorded on the company’s balance sheet. They should be recorded as owners’ equity or capital stock. A private company circulates its reports among its closed group of stakeholders and doesn’t have to share them with the public.
A private company must file financial reports with the SEC when it has more than 500 common shareholders and $10 million in assets, as set by the Securities and Exchange Act of 1934.
Why are issued shares important? Company shares not only help the corporation turn a profit, but they also help analysts and investors measure what the company is worth. For measuring market capitalization and earnings per share (EPS), analysts use the number of issued shares to calculate. Both of these figures help them to determine the company’s worth.
Your Connecticut corporation might be subject to a variety of federal, local, and statewide regulations. To see whether you need to apply for industry-specific Connecticut business licenses or permits, visit AdvanceCT’s license search.
Aside from state and local licensing, your business could require federal permits and licenses. Not all business activities will warrant a federal permit; however, you should still check whether your corporation needs one.
Typically, businesses handling agriculture, firearms, commercial fisheries, mining and drilling, radio and television broadcasting, and more, will require federal licenses or permits.
An Employer Identification Number (EIN) is needed to pay federal taxes, hire employees, open a business bank account, and apply for federal business licenses and permits. Applying for an EIN is simple and free through the IRS website. You should apply for an EIN after you register your business.
A corporation must have an EIN before they can file taxes. In addition to federal taxes, Connecticut has a corporation business tax on businesses that file as a C corporation. Some corporations are exempt from this tax. Visit this page to see if your corporation is exempt. Additionally, Connecticut requires all corporations to register with the Connecticut Secretary of State. You’ll also likely need to register for taxes with the Connecticut Department of Revenue Services, which you can find instructions for here.
The Connecticut Secretary of State requires corporations to file their first report within 30 days of the initial meeting. The first report, or initial report, helps keep your business in good standing once incorporated.
This report can be completed online with a fee of $150. Corporations can easily submit their first report on the Business Services Division Online Filing System through Connecticut’s Secretary of State website.
At a minimum, incorporating your business will cost $250 when filing your Certificate of Incorporation. Additional fees may include:
Incorporating your business can be time-consuming, which is why ZenBusiness is here to help. If anything is filed incorrectly, it could set back your schedule to becoming a corporation and cost you more money in the long run.
Incorporating your business comes with many benefits. First and foremost, incorporating your business protects your personal property. If an accident were to happen at your business, legal claimants would go through the corporation and not you.
Additionally, it sets you apart from other businesses by marking your business as a state-compliant corporation. Aside from possible business deals and added customer credibility, incorporation will give you recognition outside of the U.S. This opens the doors to business endeavors outside of the country and more opportunities to grow.
Although there are many benefits to incorporation, there are some drawbacks. To begin, corporations have additional paperwork, are more beholden to federal, state, and local compliance, and have a structured corporate hierarchy. For a company going from a small business to a corporation, it can be challenging to adjust to this change.
Depending on the corporation structure that your business chose, you will face different taxes. S, C, and nonprofit corporations have different tax structures in Connecticut. Here is a breakdown of taxation:
Corporations in Connecticut must pay federal and state payroll tax. Connecticut state payroll tax is considered high when compared to the rest of the country. It is a progressive income tax, which means that it ranges in percentage, depending on an individual’s income. The state payroll tax can be as low as 3% or as high as 6.99%.
As a corporation, you will also have to factor in state unemployment insurance (SUI). An employer is responsible for paying the state of Connecticut SUI somewhere between 1.9% to 6.8% in tax. As a new employer, you would need to pay the state a 3.2% tax rate.
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