When forming a limited liability company (LLC), it’s crucial to make a budget. In order to do this, you need to understand the expenses you must incur to start an LLC in Connecticut.
If you’re wondering how much it costs to make a Connecticut LLC, you’ve come to the right place.
In this article, you’ll learn:
- The costs of starting an LLC in Connecticut
- Additional expenses that you may want to consider
- How to pick the best LLC formation method for your business
By the time you have finished reading this article, you will be able to plan your expenses for forming a Connecticut LLC.
Total Connecticut LLC Cost – Starting at $120
According to the Connecticut Secretary of the State’s Domestic LLC Fees, the absolute lowest cost of starting a Connecticut LLC is $120.
This only includes one item:
- Certificate of Organization filing fee: $120
However, many businesses will need to obtain a sales and use tax permit to operate, which will cost an additional $100. Depending on your industry, you may also need professional licenses or business permits, the costs of which vary.
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Connecticut LLCs – the Basic Costs
The cost of starting your new LLC will vary depending on a few different factors. However, the bare minimum cost is $120. We’ve summarized your potential costs below.
Certificate of Organization Filing Fee — $120
A Certificate of Organization is the document used to officially create an LLC. To start a Connecticut LLC, you must file one with the Secretary of the State. Although this might be an intimidating concept, know that all you need to do is provide some basic info about your business.
The filing fee for a Connecticut certificate of organization is $120. You can either submit a paper form or file it online.
Sales and Use Tax Permit — $100
Not all LLCs need a sales and use tax permit. Still, Connecticut law requires all businesses that sell tangible goods and “taxable services” to charge sales and use taxes. This permit lets you collect these taxes from your customers.
You can learn more about sales and use tax laws on the Connecticut Department of Revenue’s website.
Professional Licenses and Business Permits — Various
To engage in some activities and professions, you must get a license from certain state agencies. The fees will vary based on which license you need. Some city and county governments will also require you to obtain business licenses or permits, the costs of which will also vary.
We strongly suggest using the Secretary of the State’s New Business Checklist tool to determine if your LLC needs a license.
Connecticut LLCs – Optional Costs to Consider
In addition to the mandatory expenses, you might also want to consider spending a bit more on a few extra expenditures. While this is not legally required, investing a little more cash can help your business start off on the right foot.
Expedited LLC Filing Fees — $50
A routine LLC filing can take 2 to 3 weeks to process. While filing online will get you faster service, you can also order expedited processing for a $50 fee. Expedited filings will be completed by 4 p.m. on the next business day.
Registered Agent Fee — about $100 per year
Connecticut law says that all LLCs must maintain a registered agent in the state to receive legal documents for the business.
You will provide your registered agent info when you file your Connecticut certificate of organization for no extra cost. However, there is a $50 fee if you ever need to change your agent.
New LLC owners often think that it’s a good idea to name themselves as their LLC’s Connecticut registered agent. But many don’t know this means they must always be available to receive documents during regular standard business hours and publish their addresses online.
That’s why it makes more sense to use a professional registered agent service instead. It only costs about $100 per year, and the company will make sure your LLC’s registered agent duties are fulfilled.
Check out our Best Registered Agent Services article for some of our recommendations.
Operating Agreement — Variable
An operating agreement is a contract that LLC members use to establish the rules for how they will run their business. These agreements detail essential items such as the members’ rights and duties and how members can join or leave the business.
Connecticut does not force LLCs to have an operating agreement. But, we strongly suggest that all LLCs have one. While you are allowed to write your own operating agreement, we don’t recommend you do so unless you have a legal background or prior experience.
One option is to hire a lawyer to draft your LLC operating agreement. Although this route is more expensive, your operating agreement will be written by an expert. But if you’re hoping for something cheaper, you can have an LLC formation service draft an operating agreement for as little as $39.
DBA Fee — Various
An LLC owner might decide to run their business under a name that is not its official legal name. For instance, it’s common to drop the “LLC” from a company’s name to make it less formal. Or, you may want to use a totally different name as your business evolves.
If you want to operate your company under a name other than its legal name, you must register a “doing business as” or “DBA” name. In Connecticut, DBAs are called “trade names.”
To use a DBA, you must submit a Trade Name Certificate to the town clerk in every town where your LLC operates. You can find contact information in the Connecticut town clerks directory.
Name Reservation Fee — $60
If you have chosen a name for your LLC but aren’t ready to file the paperwork, Connecticut lets you reserve a business name for 120 days. This will prevent other people from being able to take this name while you have it reserved.
Domain Name — about $20 per year
It is an unavoidable fact that, in today's world, a business needs to have a website. And to make a website for your LLC, you first need to buy a domain. Fortunately, domain names are affordable and easy to get.
Still, we suggest that you buy the domain you want ASAP. If someone else gets it first, you might not be able to use it. This will also help you avoid “domain squatters” who buy new LLCs’ domains and then resell them for a much higher price.
You can get a domain name from GoDaddy.com or a similar business for about $20 to $50 per year. Plus, there are often sales, so you can probably buy a domain for less than that.
Getting an Employer Identification Number (“EIN”) — Free
An EIN is a 9-digit identification number given to businesses by the Internal Revenue Service. It’s kind of like your LLC’s social security number. While the IRS requires some LLCs to obtain an EIN, other LLCs don’t have to get one.
However, we suggest getting an EIN for your LLC even if the IRS doesn’t require it. This is because most banks demand an EIN to open a business bank account. An EIN can also protect against identity theft.
Foreign LLC Qualification Fees — about $100 per extra state
If you want to expand your business into other states, make sure you set aside some extra funds. While you won’t need to form a new LLC, you must register as a foreign limited liability company in every state where you plan to do business.
Foreign LLC filing fees vary, but you can expect to spend about $100 per state.
Writing Formation Costs Off
The money you spend starting your LLC can usually be deducted from your income taxes as business startup expenses. The IRS provides a fair amount of guidance on this topic, so you can review the IRS website to learn more.
LLCs are generally classified as “pass-through” tax entities. So, LLC owners can deduct up to $5,000 in startup costs in the first year.
Frankie decides to start a single-member LLC and open a bakery in Fairfield, Connecticut. She plans to have six employees. Her formation costs are as follows:
- Connecticut LLC Certificate of Organization: $120
- Expedite Fee: $50
- Sales and Use Tax Permit: $100
- State Bakery License Fee: $40
- Fairfield Food License Fee: $216
- Operating Agreement: $50
- Registered Agent Fees: $110
- Name Reservation Fee: $60
- DBA Fee: $10
- Web Domain Costs: $24
As a pass-through entity, the LLC won’t pay any income taxes. Rather, Frankie herself will report her earnings from the LLC and any business deductions on her personal state and federal income taxes.
Frankie’s total startup expenses were $780. Before she deducted these costs, her total taxable income was $36,000. However, by deducting her start-up costs, she reduces her taxable income to $35,220. This will lower her 2022 federal income taxes from $4,121 to $4,028.
While this is not a substantial drop, business owners who regularly deduct their costs will see their savings add up over time.
Cheapest Way to Start an LLC in Connecticut
When choosing a formation method for your Connecticut LLC, be sure to keep your needs in mind. Some of the most common approaches are detailed below.
Formation Service – $39 + state fees
An LLC formation service will manage the entire process for you. While they aren’t lawyers, they have ample experience and can ensure that your LLC formation is carried out quickly and reliably.
An LLC formation service is often the most reasonable option. This method’s benefits include:
- They’re easy. In most cases, a formation service will have helped hundreds of people through the exact process you are struggling with now. They have all the documents, information, and expertise you need right on hand.
- They don’t cost much. Because formation services have such a large volume of business, they don’t have to charge their clients that much money.
- They’re reliable. All of the formation services’ products and procedures have been tested hundreds of times over in the real world. That kind of experience should give you peace of mind and confidence going forward.
- They’re fast. Formation services have seen almost every business formation situation already. Chances are, they have many solutions for you that are ready right now before you even know you need them.
Still, formation services don’t work for everyone. Some of the negative aspects of using an LLC formation service are:
- They’re not the best solution for complex LLCs. If you are forming a complicated company or one in a heavily regulated industry, you will have concerns that probably need more focused expertise in that area of business.
- Even if a formation service is a good fit, you can expect upselling. Formation services have to make money too, and some of them may pressure you to buy formation products or business services you don’t need. Even when you are using a formation service, you need to be a smart and informed consumer.
Using a professional LLC formation service can be a great way to set up a business. Check out our Best LLC formation services article for some of our suggestions.
When you hire an attorney, you entrust your business to an experienced professional. Just remember that you will be paying a premium for their expertise. Many lawyers charge hourly rates for their services, often several hundred dollars per hour.
Despite the cost, hiring a lawyer comes with some significant advantages:
- Lawyers help you manage risk. If you are starting a business with complicated legal issues, hiring a lawyer would be the best choice.
- Lawyers offer more customization when you need it. Do you need specific things put in an operating agreement? Is your company going to have a unique ownership structure? You may need an attorney to make sure these issues are handled properly.
However, the disadvantages of this option can outweigh the advantages for many LLCs:
- Lawyers cost more than any other option. The price tag alone should convince you that if you don’t need a lawyer, it’s not worth hiring one.
- Finding a lawyer takes a long time. Getting a lawyer who specializes in what you need, costs what you’re willing to pay, and can work with you well is a tall order.
- Lawyers also take longer to form a business than a formation service. Because lawyers are also very careful people, they will generally take much longer to form your company than non-lawyers would. Fortunately, most people don’t need a lawyer. In 90% of cases, a formation service will do just fine.
Do it Yourself
Of course, you can always choose to start your LLC yourself. But keep in mind that your time isn’t totally free of cost. The time you spend working on paperwork is time you can’t put into making your business thrive.
Still, there are some advantages to a DIY approach:
- Personal knowledge. A DIY business owner will learn a lot about the process while forming their own business, and they probably will retain that knowledge for years to come.
- It costs less upfront. If you don’t account for the value of your time, a DIY solution is the cheapest option.
Just make sure you remember the drawbacks:
- You’re losing money when you consider how much time it takes to DIY. If you figure out that your time is worth $30 per hour, and you take 20 hours to complete your business formation, you have essentially spent $600 on business formation.
- There’s the risk of making a mistake. DIY business owners can easily make a mistake with all the paperwork that can cost them even more time and money.
- It’s a headache. State workers are very helpful, capable people. But they will also tell you that the laws and rules governing business formation are not easy, and they follow those rules for a living. It’s going to be even harder for you.
Annual Connecticut LLC Fees: How Much Will it Cost to Maintain your LLC?
To keep your LLC in good standing, you must file an annual report with the Secretary of the State. You must file online unless you request a file by mail waiver. There is an $80 filing fee.
You may also need to renew your business licenses and permits.
Additionally, some of your optional costs will be due yearly. For instance, you may need to pay the following:
- Registered agent service fee: approximately $100
- Domain name registration: $20 to $60
How Much are LLC Taxes in Connecticut
Since LLCs are generally pass-through tax entities, the business itself will not be subject to income tax. Instead, LLC owners must pay taxes on their share of the profits.
While Connecticut previously imposed a Business Entity Tax on LLCs, this tax was repealed starting in 2020 and is no longer required.
Connecticut LLC Formation Costs Quick Links
- Connecticut Online Filing
- Connecticut Domestic LLC Fees
- Connecticut New Business Checklist
- Connecticut Secretary of the State
- Connecticut Department of Revenue
- IRS — apply for an EIN online
- IRS information regarding the federal tax treatment of LLCs
Connecticut LLC Formation Costs FAQs
How much does it cost to start an LLC in Connecticut?
The minimum cost is $120. But depending on the type of business you are starting, and where you will operate, it may cost you more.
What is the cheapest way to start an LLC in Connecticut?
The do-it-yourself approach is the least expensive in terms of cash spent. But when you account for the cost of your time, the most cost-effective method is usually an affordable LLC formation service.
Do I need to hire an attorney to form an LLC in Connecticut?
No. Forming most LLCs won’t require the assistance of a lawyer. Using a DIY approach or an LLC formation service will often suffice.
Can I pay to form an LLC more quickly in Connecticut?
Yes. You can expedite an LLC filing for a $50 fee, and it will be processed by 4 p.m. on the next business day.