How to Start a Connecticut Corporation


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Start a Connecticut Corporation

When you plan to start a business in Connecticut, you must decide on the appropriate structure. Starting a corporation may be more complicated than creating an LLC in Connecticut or a sole proprietorship. However, it is not that difficult as well. There are a few guidelines that you should be aware of when it comes to creating Connecticut corporation. Starting a corporation involves a legal process, that is, the process of incorporation.

In this article, I will share a step-by-step guide to start a corporation in Connecticut. I will also enlighten you on the advantages and disadvantages of having a corporation. Some people consider starting a corporation in Connecticut more than other business structures since it has many advantages over other forms.

What is a Corporation in Connecticut

In definition, a corporation is a formal organization established by stockholders, shareholders, or other people to make a profit. Like individuals, corporations can undertake contracts, own assets, sue and be sued, pay taxes, limit state and federal taxes, and loan funds from banking institutions.

Common Types of Corporations

Before you start with the process of forming a corporation, you should know what type of corporation you will form. There are several different forms of corporations you can take into consideration, depending on your corporation’s objectives and ownership structure.

  • C-Corporation: C-Corporation is the most known type of incorporation. They have almost all corporate distinguishing characteristics. Profits are distributed to corporate owners who are taxed at an individual level. The corporation is taxed similarly to a business unit.
  • S-Corporation: An S-Corporation is set up similarly to a C-corporation but has different tax implications and owner limits. S-corps have no more than 100 stockholders and are not taxed separately. These business units must also file paperwork with the Internal Revenue Service (IRS) to obtain their status. 
  • Non-profit Corporation: Nonprofit businesses are frequently used by religious, educational, and charity institutions to run their operations without making a profit. Thus, a nonprofit corporation is exempt from paying taxes. The nonprofit organization’s gifts, contributions, or cash are reinvested in the company to fund its growth, future endeavors, or operations. Read how to start a nonprofit corp in Connecticut to learn about nonprofit corporations.

If you have a small business, it is recommended that you form an LLC instead of a corporation in Connecticut. LLCs have more tax benefits than other structures. Besides, LLCs protect your personal assets. However, it is wise to consult a legal expert before you start setting up your business in Connecticut.

LLCBuddy Editorial Team

How to Start a Corporation in Connecticut

To start a corporation in Connecticut, you must follow the below steps that, include forming a corporation name, appointing a board of directors, filing for Certificate of Incorporation, drafting corporate bylaws, meeting with the board of directors, issuing stocks,  creating a shareholders agreement, requesting for an EIN, and getting a license and permit. All these steps are basic ones. It can be changed depending on the type of corporation you form and the nature of your business. 

Step 1: Choose a Corporation Name in Connecticut

Naming your business is one of the most crucial activities during the startup phase. Your corporation name serves as the foundation for your brand. Legal procedures should be taken into account when choosing your corporation name. Choose a corporation name that will enable you to develop a strong brand identity without being hampered by irrelevant factors. 

If you are forming an LLC, there is a complete guide on Connecticut LLC name guidelines for a proper LLC name. Here are some guidelines you must follow while naming your corporation in Connecticut- 

  • Your business name must contain entity identifiers, such as “Incorporated,” “Limited,” “Corporation,” or “Company,” or an abbreviation, such as “Inc.,” “Co.,” or “Ltd.”
  • Exclude any words in your business name, such as “Trust,” “Bank,” “Credit Union,” or “Trustee,” or words related to a government agency, such as “FBI,” “State Department,” or “Treasury.”

Step 2: Board of Directors Initial Appointment

To form a corporation in Connecticut, you must appoint an initial board of directors before making them permanent once the corporation is formed. In Connecticut, you may appoint at least Three board of directors. The initial board of directors is in charge of guiding the overall strategy of your business. The structure, responsibilities, and powers given to a board of directors are determined by the bylaws of a company or organization. So, appointing your corporation’s initial board of directors in Connecticut is a big step in forming a corporation. 

Step 3: Filing the Certificate of Incorporation in Connecticut

After you appoint the initial board of directors in your Connecticut corporation, the next step is to write and file a Certificate of Incorporation. In writing, the Connecticut Certificate of Incorporation, the corporation name, principal place of business, the purpose of business, Connecticut Resident Agent contact information, and the names and addresses of incorporators and/or initial board members, should be written. 

Filing a Certificate of Incorporation in Connecticut may be done with three ways, online, by mail and in-person. The Certificate of Incorporation fee may vary from different states. However, in Connecticut, it costs $250 for filing online, in-person and by mail.

  • Online Filing: Get the online form from Secretary of State, fill it up, and submit. Don’t refresh the page during the process. It will erase everything.  
  • Offline filing: Send the form by mail to Business Service Division, Connecticut Secretary of the State, P.O. Box 150470, Hartford, CT 06115. Or drop it off in person to Business Services Division, Connecticut Secretary of the State, 165 Capitol Ave., Suite 1000, Hartford, CT 06106.

Step 4: Draft Corporate Bylaws

Now you are done filing a Certificate of Incorporation in Connecticut, the next step is to draft corporate bylaws. Corporate bylaws are the basic rules that control a corporation. It includes the organization’s structure, processes, laws, and rules. As a result, all personnel, managers, and corporation members must obey the firm’s rules.

In creating corporate bylaws, you should include the following on how the decisions will be made-

  • The responsibilities are given to each officer.
  • How will judgments in business be made?
  • Where and when are the annual shareholder meetings?
  • The minimum number of shareholders required for decision-making.
  • Location and timing of dividend payments.

Step 5: Hold the First Board of Directors’ Meeting

After drafting the corporate bylaws, gather all the board of directors for the first meeting. This meeting will be finalized by appointing directors to manage the company’s daily operations, approve the bylaws, choose the corporation’s accounting year, and approve the stock issue. All board meetings should have minutes taken and stored with the company’s records.

Step 6: Issuing Stock in a Corporation

After starting your Connecticut corporation, one of the first official corporate actions is issuing stock to the shareholders. Keep track of the number of shares issued to each shareholder and the purchase price. A corporation in Connecticut is managed by its shareholders, who contribute to the business in exchange for ownership shares.

Step 7: Draft and Finalize a Shareholders Agreement

Even though drafting and finalizing a shareholders agreement is unnecessary, I suggest you still comply since it will benefit your corporation and its shareholders. A small business’s shareholders enter into a shareholder agreement contract. It establishes how ownership will be handled in unexpected situations, like a shareholder passes away, retires, becomes disabled, or quits the corporation. Early on in the life of your Connecticut corporation, signing a shareholders’ agreement can help maintain corporate continuity and prevent future disputes.

Step 8: Request an EIN in Connecticut

After everything is in place, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your Connecticut corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website. 

The application of an EIN in Connecticut can be through the following:

  • Apply Online- The EIN online application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is 4 weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

After you have your EIN number, you can benefit in a number of ways. It will give your corporation the final advantage necessary to operate at full capacity without encountering legal or judicial issues.

Step 9: Get Licenses and Permits for your Corporation in Connecticut

Before your corporation operates in Connecticut, you must have a business license. A business license is a document issued by a government agency that permits you to operate your business in the geographic region that that agency governs. To legally operate your corporation, you’ll need a business license. Numerous corporate licenses need to be filed and renewed regularly. Check out how to get business licenses and permits in Connecticut to know more.

You must also register a DBA name if you intend to conduct business using a name other than your corporation’s legal name. The DBA name is sometimes known as “doing business as” or a “fictitious business name.” Depending on your location, you may need to register the DBA with your state, city, and county. You can skip this step if your business solely uses your legal company name.

Important Information

Paying your Taxes in Connecticut

Even if you have established your corporation in Connecticut, pay your taxes and keep everything up to date so you won’t pay any penalty. Unlike an LLC, there is a corporate tax that every corporation in Connecticut has to pay. On the other hand, they must pay income taxes based on their business income. Some other types of taxes in Connecticut are sales tax, franchise tax (not applicable to all the states), and other state taxes.

Cost of Forming a Corporation in Connecticut

A filing and annual fee must be paid to form a corporation in Connecticut. Without it, your corporation won’t operate. The initial filing fee for a corporation may vary depending on the state. However, in Connecticut, it costs $250 for filing online, in-person and by mail. The corporation in Connecticut also has to file an annual report (though it might not be mandatory, it is recommended to file one). Ensure you comply with all the necessary fees and costs so your corporation will run successfully and smoothly. If, in the future, you make any changes to your corporation, you must file the Connecticut Amendment. It costs $120.00 to file an amendment in Connecticut.

Advantages of Starting a Corporation in Connecticut

  1. Limited Liability: The biggest advantage of setting up a Connecticut corporation is that the shareholders are not personally responsible for the debts of the company. As a result, when you incorporate as a corporation, personal assets like homes, vehicles, and other possessions are prohibited. One of the main benefits of setting up a corporation over a general partnership or sole proprietorship business structure is that neither the business nor the owners are held legally responsible for the obligations of the business, even if it means giving up their personal assets. 
  1. Limitless Corporation: The fact that a corporation’s existence is independent of its owners is another significant benefit of incorporation. In other words, a corporation has an endless life and will continue operating normally even if the owner dies or decides to sell their ownership.
  1. Advantages in Tax: The deduction of health insurance premium payments made on behalf of an owner-employee is one of the many financial benefits to which corporations are entitled. Corporations also save on self-employment taxes since their revenue is not subject to workers’ compensation, Social Security, or medical taxes. Tax rates on corporate profits are lower than those on individual income.

FAQs

What are the requirements to start a corporation in Connecticut?
To start a corporation in Connecticut, you must file Articles of Incorporation with the Connecticut Secretary of State. Additionally, you must obtain a Certificate of Good Standing, obtain a Federal Employer Identification Number (FEIN), and obtain a Business Entity Tax Registration Certificate.
How much does it cost to form a corporation in Connecticut?
The filing fee for forming a corporation in Connecticut is $220. Additional fees may apply for expedited services.
How long does it take to form a corporation in Connecticut?
It typically takes 7-10 days to form a corporation in Connecticut.
What forms do I need to file to register a corporation in Connecticut?
In order to register a corporation in Connecticut, you must submit Articles of Incorporation to the Connecticut Secretary of State.
What information is required to form a corporation in Connecticut?
To form a corporation in Connecticut, you must provide the name of the corporation, the purpose of the corporation, the address of the corporation’s principal office, the name and address of the registered agent, the duration of the corporation, and the name and address of the incorporator.
What is the procedure to form a corporation in Connecticut?
The procedure for forming a corporation in Connecticut includes filing Articles of Incorporation with the Connecticut Secretary of State, obtaining a Certificate of Good Standing, obtaining a Federal Employer Identification Number (FEIN), and obtaining a Business Entity Tax Registration Certificate.
Is a Registered Agent required to form a corporation in Connecticut?
Yes, a Registered Agent is required to form a corporation in Connecticut. The Registered Agent must be a Connecticut resident or a company authorized to do business in Connecticut.
Is an EIN required to form a corporation in Connecticut?
Yes, an EIN is required to form a corporation in Connecticut. You must obtain an EIN from the IRS prior to filing your Articles of Incorporation.
Do I need to publish a notice of formation for my corporation in Connecticut?
No, you do not need to publish a notice of formation for your corporation in Connecticut.
What is the filing fee for forming a corporation in Connecticut?
The filing fee for forming a corporation in Connecticut is $220. Additional fees may apply for expedited services.
What type of taxes will I be required to pay in Connecticut?
Corporations in Connecticut are subject to income tax and franchise tax.
What are the annual filing requirements for a corporation in Connecticut?
Corporations in Connecticut are required to file an Annual Report with the Connecticut Secretary of State.
What is the penalty for not filing an Annual Report in Connecticut?
Corporations in Connecticut are subject to a penalty of up to $250 for failure to file an Annual Report.
What is the corporate income tax rate in Connecticut?
The corporate income tax rate in Connecticut is 6.99%.
Are corporations in Connecticut subject to franchise tax?
Yes, corporations in Connecticut are subject to franchise tax.
What is the franchise tax rate in Connecticut?
The franchise tax rate in Connecticut is 8.93%.
Is a LLC the same as a corporation in Connecticut?
No, a LLC is a separate legal entity from a corporation in Connecticut. A LLC has different formation requirements, liability protection, and tax treatment.
What are the advantages of forming a corporation in Connecticut?
The advantages of forming a corporation in Connecticut include limited liability protection, perpetual existence, and transferability of ownership.
What are the disadvantages of forming a corporation in Connecticut?
The disadvantages of forming a corporation in Connecticut include increased paperwork, higher costs, and increased liability exposure.
Is a business plan required to form a corporation in Connecticut?
No, a business plan is not required to form a corporation in Connecticut. However, it is strongly recommended that you create a business plan prior to starting your business.
Is there a minimum amount of capital required to form a corporation in Connecticut?
No, there is no minimum amount of capital required to form a corporation in Connecticut.
Do I need a lawyer to form a corporation in Connecticut?
No, you do not need a lawyer to form a corporation in Connecticut. However, it is recommended that you consult a lawyer for legal advice.
Is a board of directors required to form a corporation in Connecticut?
No, a board of directors is not required to form a corporation in Connecticut. However, it is recommended that you form a board of directors to manage the corporation.
Can I form a corporation in Connecticut without having a physical office?
Yes, you can form a corporation in Connecticut without having a physical office.
What is the process for dissolving a corporation in Connecticut?
To dissolve a corporation in Connecticut, you must file Articles of Dissolution with the Connecticut Secretary of State. Additionally, you must notify the IRS and any applicable state or local tax authorities.
Is there a fee to dissolve a corporation in Connecticut?
Yes, there is a fee of $20 to dissolve a corporation in Connecticut. Additional fees may apply for expedited services.
Is a Certificate of Good Standing required to form a corporation in Connecticut?
Yes, a Certificate of Good Standing is required to form a corporation in Connecticut. You must obtain a Certificate of Good Standing from the Connecticut Secretary of State prior to filing your Articles of Incorporation.
Is a Business Entity Tax Registration Certificate required to form a corporation in Connecticut?
Yes, a Business Entity Tax Registration Certificate is required to form a corporation in Connecticut. You must obtain a Business Entity Tax Registration Certificate from the Connecticut Department of Revenue Services prior to filing your Articles of Incorporation.
What is the procedure to amend the Articles of Incorporation in Connecticut?
The procedure to amend the Articles of Incorporation in Connecticut includes filing an Amendment to the Articles of Incorporation with the Connecticut Secretary of State.
What is required to start a corporation in Connecticut?
To start a corporation in Connecticut, you must file a Certificate of Incorporation with the Connecticut Secretary of State. You will also need to pay the applicable filing fees, obtain a taxpayer identification number, issue stock, and appoint officers and directors.
How much does it cost to start a corporation in Connecticut?
The filing fee to start a corporation in Connecticut is $120. Additionally, you may need to pay fees for other services such as registered agent fees, publication fees, and a Tax Department registration fee.
What is the process for forming a corporation in Connecticut?
The process for forming a corporation in Connecticut involves filing a Certificate of Incorporation with the Connecticut Secretary of State, obtaining a taxpayer identification number, issuing stock, appointing officers and directors, and paying applicable filing fees.

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Conclusion

When determining which corporate form is best for you, be selective. You must know which business structure is bet-fitted for your product/service in Connecticut. Consult a legal professional before you take the first step while setting up your business. Finding the ideal ratio of corporate advantages and legal protection that meets your unique needs is very important. In forming a corporation in Connecticut, you need to ensure that every detail is well-formed so that your corporation will be successful. And if you have any questions, share them in the comment section below.


About Author & Editorial Staff

Steve Goldstein, founder of LLCBuddy, is a specialist in corporate formations, dedicated to guiding entrepreneurs and small business owners through the LLC process. LLCBuddy provides a wealth of streamlined resources such as guides, articles, and FAQs, making LLC establishment seamless. The diligent editorial staff makes sure content is accurate, up-to-date information on topics like state-specific requirements, registered agents, and compliance. Steve's enthusiasm for entrepreneurship makes LLCBuddy an essential and trustworthy resource for launching and running an LLC.

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