How to Start a Business in Connecticut

You may know that Connecticut boasts a high quality of life for its residents, who have some of the highest incomes in the nation, but what’s it like for budding entrepreneurs? If you’d like to join the new small business owners in Connecticut, read on to learn the basics of registering a business in CT.

Follow the steps below to start a business in Connecticut.

Step 1: Create a business plan

Your company begins with a business plan. Planning can sometimes seem intimidating for entrepreneurs, but it doesn’t have to be. Writing a business plan is a vital step to set out on paper or on screen your overall sense of:

  • What business you want to run
  • A list of SMART goals 
  • The customer problem that your business solves
  • How your business can stand out in the market
  • Who your customers are and how you’ll attract them
  • How you’ll fund the company until it reaches profitability
  • What goals and metrics you’ll track
  • What print and online marketing assets (such as brochures, your company website, or print ads) you’ll invest in
  • Your short-term and long-term vision for the company’s scale and growth

Without a firm business plan, many creditors and potential business partners won’t look twice at your idea.

Need help creating a business plan for your Connecticut business? We put together a comprehensive library of articles and guides on business planning.

Step 2: Choose a business structure

As an owner, you need to decide how you will structure your business entity. There are several different types of businesses to choose from, and each has its pros and cons.

The most common entity types are sole proprietorships, general partnerships (GPs), corporations, and limited liability companies (LLCs). 

Sole Proprietorships in Connecticut

Sole proprietorships and GPs are unincorporated businesses that are free and simple to set up. Taxation is straightforward, but sole proprietors and GPs leave themselves open to personal liability if something goes wrong with the business.

For example, someone suing the business can go after the owner’s personal assets.

Forming a legal business entity such as a limited liability company or corporation creates personal asset protection by separating personal and business accounts.

Connecticut Corporations

The corporation structure offers liability protection, so if your business ends up in trouble, your home, bank accounts, and other assets are protected. C corporations come with a less-than-ideal tax setup that taxes income once at the corporate level and again on personal tax returns.

S corporations provide liability protection too, without double-taxation, but are harder to qualify for.

Connecticut LLCs

An LLC in Connecticut can be a best-of-both-worlds option. LLCs require more paperwork and setup costs than a sole proprietorship, but there are significant benefits as well. The biggest benefit of an LLC is that it legally separates your personal assets from the company.

By doing so, it provides personal liability protection if the business files for bankruptcy or gets sued. Yet you’ll still only get taxed once for income, on your personal tax return, just like with a sole proprietorship.

We can file the paperwork to form an LLC or corporation for you with our business formation plans.

Still want to learn more about business structures before you choose one for your Connecticut business? This business structures page will help you get more clear.

Step 3: Determine your startup costs

Counting up your startup costs is an important step to take before spending money on the business. It can be helpful to think of costs in three categories: one-time, fixed, and ongoing. 

  • One-time costs only happen once. Getting a logo designed, a website built, a prototype made, and buying office equipment are good examples of one-time costs.
  • Fixed costs happen regularly, but they won’t change from month to month regardless of your sales. These costs are things like your attorney and accountant, rent, and insurance.  
  • Ongoing expenses are the ones that need some longer, more in-depth thought and forecasting. They change depending on how much business your company is doing, and they’re nearly always present. Think seasonal labor, product creation costs, shipping, etc. 

If your business grows and requires additional employees, plan to include estimates for payroll, healthcare costs, unemployment insurance, and Connecticut’s workers’ compensation costs.

Also, keep in mind how you’ll market the business, such as your company website, social network posting, advertising (such as online, print, and broadcast), and industry events. Investigate what the costs of each marketing method will be.

While accessing funds to cover business costs may take some time, it’s an essential step in the startup process, so include it in your detailed business plan. 

Does math overwhelm you? That is okay! We’ll walk you through business cost calculation in this guide.

Step 4: Pick a business name

Do you have a name picked out for your business? Like most states, Connecticut has rules that every entrepreneur must follow when picking a company name. 

Rules on Picking a Business Name

For starters, no two businesses can have the same name. The state says every company name should be distinguishable from one another and doesn’t allow duplicate titles. To see if a name is available, conduct a business entity search on the Connecticut Secretary of State website.

We walk you through the search process on our Connecticut business entity search page. This will help prevent legal issues, confusion among customers, and ultimately wasted time and money.

Reserve a Business Name

The state lets you reserve a name for a fee. If you don’t plan to incorporate your business for a few months, this is an excellent way to hold the title so it won’t vanish.

You also can’t use “restricted words” in a company name. Restricted words are inappropriate words or any words that refer to a government agency. 

Purchase a Domain Name

As you settle on a company name, you may also consider getting the matching domain name. If this feels outside of your wheelhouse, we can help you register a domain name.

Step 5: Register your Connecticut business and open financial accounts

If you’ve chosen a business structure such as an LLC or corporation, you’ll need to register your small business with the Connecticut Secretary of State.

Apply for an Employer Identification Number (EIN)

Many businesses are also required to get a federal employer identification number (EIN), which is your federal tax ID that you also use to hire employees.

Note: If you’re a sole proprietor, you can use your social security number as your tax ID, though most experts recommend obtaining an EIN to help avoid identity theft.

Open a Business Bank Account

Next, open up a business bank account to avoid mixing business finances with personal. It creates a mess come tax time and makes it hard for you to see the true income and expenses of the business. It can also sometimes make your personal assets vulnerable by voiding the liability protections you would otherwise have from an LLC or corporation.

At this time, you can also consider applying for a business credit card to cover small purchases at the start and build your credit.

Apply for Connecticut Permits and Licenses

Next, apply for any permits or licenses required to do business in Connecticut. Permits and business licenses vary by industry, and they can be needed at the federal, state, and local levels.

There’s no central authority to tell you every license and permit your business requires, so you’ll have to do some research or have someone like us do the research for you with a business license report.

Talk with a qualified insurance agent in Connecticut to learn what coverage your business may need, including workers’ compensation, general liability, and others. 

Step 6: Market your business in Connecticut

Even before opening your doors in Connecticut, it’s essential to think about how you’ll attract customers. By marketing your business, you make customers aware of your services and products. It’s your way to make the case for why someone should choose you over the competition. Here are ways to market your business:

  • Creating a marketing plan is an important first step. It establishes a strategic roadmap to coordinate, deliver, measure, and analyze your marketing activities.
  • A company website is essential, with pages that showcase your offerings, tell customers your business’s story, and have a way for them to get in touch.
  • There are many DIY marketing tactics you can use to get the word out about your new company. For starters, open social media accounts on the channels where your future customers are. 
  • There are also free online directories you can add your business to, including Google My Business and Yelp. Both also include options for customer reviews, which can help as digital word-of-mouth marketing for your company.
  • Consider inviting local media to your grand opening and to different events you hold throughout the year.

Benefits of Opening a Business in Connecticut

While Connecticut is headquarters to some very large businesses — 14 companies on the 2021 Fortune 500 list — it’s also home to approximately 350,376 small businesses, making up 99.4% of Connecticut businesses.

To support those small companies, the Connecticut Department of Economic and Community Development has established the Office of Small Business Affairs. The office can provide support for financing like loans and grants while also putting you in touch with the various federal, state, public/private, and nonprofit organizations that can assist your business.

Examples of Good Businesses to Start in Connecticut

Connecticut’s small business economy employs more than 745,000 people. As encouraging as that may be, you may be wondering what kinds of businesses could fare well in Connecticut.

For inspiration, the Small Business Administration (SBA) lists the following industries as the state’s biggest employers: 

  • Health care and social assistance
  • Accommodation and food services
  • Manufacturing
  • Retail trade
  • Professional, scientific, and technical services
  • Construction

For more ideas, read our guide on the Best Businesses to Start in Connecticut.

Bottom Line

Connecticut already has such a good track record of hosting new small businesses that you may be tempted to join them, taking advantage of a highly educated workforce and a high standard of living. When you’re ready, we can help you navigate the process of starting a business in Connecticut with our many services. Contact us today to see how we can help.

Top Connecticut Cities to Form Businesses

Hartford: Known as the “Insurance Capital of the World.” Strong in insurance, financial services, technology, and healthcare innovation. Offers robust governmental support and business development resources.

Stamford: A corporate hub within the Greater New York metropolitan area. Strong in finance, telecommunications, and media. Home to numerous Fortune 500 companies and benefits from proximity to New York City.

New Haven: Home of Yale University, fostering a rich entrepreneurial ecosystem. Focus on biotechnology, pharmaceuticals, and health services. Access to world-class research facilities and a highly educated workforce.

Norwalk: Diverse economy with strengths in manufacturing, retail, and maritime services. Benefits from coastal location and major transportation networks. Growing arts and cultural scene enhances quality of life.

Bridgeport: Largest city in Connecticut focusing on economic revitalization. Growing sectors include healthcare, education, and light manufacturing. Geographic advantages for shipping and logistics due to its position on Long Island Sound.

These cities offer a blend of industrial strengths, strategic geographic locations, and access to essential business resources, making them ideal for various types of business ventures in Connecticut.

Connecticut Business FAQs

  • LLCs formed after January 1, 2002, must pay an annual Business Entity Tax of $250. To check on other tax requirements, see the Connecticut State Department of Revenue Services website.

  • The per capita annual income in Connecticut from 2015 to 2019 was $44,496, well above the national income of $34,103, according to the U.S. Census Bureau.

  • According to the state’s website, advanced manufacturing, aerospace and defense, bioscience and healthcare, financial services, green energy, insurance, technical innovation, and film, television, and digital media are all important to the Connecticut economy.

Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

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Written by Team ZenBusiness

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