Starting a limited liability corporation in Connecticut can offer a lot of advantages for startup owners. Compared to many other states, Connecticut law allows for a greater degree of separation between partners and the business. The state also allows for more flexible distribution of profits from shareholder stakes. New business partners looking to take advantage of Connecticut LLC laws need to know what the state requires of them. Here is how to start an LLC in Connecticut for new startup owners.
Register A Name
The first requirement for incorporation in Connecticut is that a business must register a name with the Secretary of State. A corporation’s name can be anything that the business owner wants, and does not have to match the day-to-day name. Connecticut does allow a businesses’ name to exclude suffixes like LLC from their official name. The name must also be significantly different from other business names currently registered in Connecticut. As a name is required to fill out all other paperwork, startup owners can hold a name for up to 120 days before incorporation. New business owners can use excel database functions to search through a database of existing business names to make sure their name is not currently in use.
Decide On The Number Of Partners
Finding the right number of partners is a major decision for startup owners looking to create a new LLC. In Connecticut, an LLC can be operated by as little as a single person or as many people as are needed. A sole proprietorship has the advantage of being much simpler to incorporate as more partners require more documentation. However, multiple partners can change the way the IRS regards the corporation for tax purposes. Single member LLCs will be taxed as sole proprietorships while multi-member LLCs will be taxed as partnerships. Prospective startup owners should consider the advantages and disadvantages of the number of partners they choose to incorporate with.
Find A Registered Agent
Incorporation in Connecticut requires the appointment of a registered agent that has a valid address in Connecticut. The registered agent must be available during normal business hours to receive legal and tax documentation. These agents can also handle this documentation on behalf of businesses depending on the agent. New startup owners can choose to name themselves as the registered agent, but this requires a physical address in Connecticut. Once your business is up and running, consider that accountants are worth it for handling your taxes. Obtaining a registered agent is a key step in forming a new LLC in Connecticut.
Prepare An Operating Agreement
An LLC operating agreement serves as the legal and operational foundation of a functioning business in Connecticut. While not strictly required, this document is highly recommended, especially for businesses with multiple partners or trustees. The document describes to the state how the business will be run. The document will list details like management structure, how the business will profit, and the rights of any members. It can help to preserve limited liability if the business acquires any debts as it demonstrates how the business is distinct from its trustees. Potential startup owners can use an operating agreement to protect their liability while organizing their new company.
File Articles Of Incorporation
After a prospective startup owner has finished preparing their new corporation they must submit the articles of incorporation to the Secretary of State. There is a one time filing fee of $120 for submission. The articles of incorporation include the name, operating agreement, registered agent, and lists any partners. During this phase, at least one partner must be physically present in Connecticut to give their signature. Once the Secretary of State approves the articles of incorporation, a business can begin legally operating. Filing the paperwork correctly allows new startup owners to begin their LLC on the right foot.
Incorporating a startup LLC in Connecticut has a lot to offer new startup owners if they meet the requirements. First, they have to register a name and register their LLC before the name expires. Next, business owners must decide on how the business will be structured and how it will take on partners, if any. A registered agent must be contracted with to handle official business and onboarding paperwork. While not necessary, preparing an operating agreement can help new LLCs organize. Finally, a prospective business owner must submit the articles of incorporation and pay the $120 fee. Abiding by these rules allows prospective startup owners to incorporate an LLC in Connecticut legally.