How to Start a Business in Connecticut

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by Chamber of Commerce Team
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There are many advantages to starting a business in Connecticut: New England’s southernmost state boasts a high startup early survival rate of 81.29% and an above-average new entrepreneur opportunity share of 69.38%. These stats indicate that folks are starting businesses by choice in Connecticut and that a large majority of them are surviving at least one year beyond the date they were formed.

While Connecticut is not among the cheapest states to live and do business in, its GDP of 69,641 (chained 2012 dollars) is 6th in the nation, meaning that the state’s productivity and success potential are both quite high. The promise of starting a business in the Constitution State outweighs the costs involved. In this guide, we’ll walk you step-by-step through the process of launching a company in Connecticut, while providing a wealth of resources that’ll give you an edge over the competition.

Connecticut small business statistics at-a-glance

  • Connecticut’s early startup survival rate is 81.29%. This figure is the percentage of startups still active one year since forming.
  • The state’s new entrepreneur opportunity share is 69.38%, which is the percentage of entrepreneurs who started their business by choice rather than necessity. 
  • Connecticut’s GDP of 69,641 (in chained 2012 U.S. dollars) is 6th in the nation.
  • 360,127 small businesses are currently operating in the state, comprising 99.4% of the state’s businesses.
  • Connecticut small businesses employ 741,920 workers, which is 48.2% of the state’s workforce.
  • With 144,051 employees, the health care and social assistance industry is the largest small business employer in the state, followed by accommodation and food services, and manufacturing.
  • 70,200 small businesses in Connecticut are minority-owned.

Sources: Kauffman: Indicators of Entrepreneurship, Small Business Administration, US Census Bureau: Statistics of Small Businesses

Starting a business in Connecticut in 12 steps

1. Develop an idea

Every successful business starts with a good idea. Ask yourself these questions:

  • Which product or service can your business provide that doesn’t already exist on the market? 
  • How does your business idea refine an existing product or service?

Determine your personal strengths and interests: developing an idea that suits your personality and positive traits will provide motivation to put in the long hours necessary in addressing the myriad challenges you’ll face in getting your business off the ground.

Figure out how to market your expertise: if your business idea is not something you totally believe in and can sell effectively, it will be much harder to succeed.

2. Do the research

Once you have an idea, it’s time to put it through the wringer and decide if it’s viable in the market. Conduct market research to arrive at answers to these key questions:

  • Is there a demand for your product/service in Connecticut? 
  • Who is your target market?
  • Do existing businesses in Connecticut offer a similar product/service?
  • What makes your business unique compared to the competition?

Coming up with satisfactory answers may require refinement, or even a total overhaul, of your original idea. Be patient: you’ll only want to proceed with the next steps after determining that a niche exists in the Connecticut market for your business idea.

3. Draft a business plan

Now it’s time to write the blueprint of your business. A great business plan should chart the path of your company from infancy to success while being able to attract investors to provide financing.  

Your business plan ought to include the following sections:

  • Executive summary – An overview of your business and why it will be successful
  • Description of business – Explain the advantages of your business and the problems it solves
  • Market research – Provide research on your industry, target market, and potential competitors 
  • Organization and staff – Detail the nuts and bolts of your business; how it’s structured and who will run it
  • Product or service description – State what you are selling or offering
  • Marketing plan – Explain your strategy for attracting customers
  • Fundraising – The money you’ll need in the next five years to grow your business and how you’ll spend it
  • Financial forecast – Data and balance sheets providing a financial forecast for your business
  • Appendix – An optional section with supporting and/or requested documents like resumes, letters of reference, permits, etc.

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4. Secure funding

Every business needs money to get off the ground. In fact 82% of businesses that fail do so because of a lack of cash flow, U.S. Bank found in a recent study. Your business plan should include a detailed estimate of the funds you’ll need to cover expenses for at least a year, so now it’s time to acquire the money.

If you aren’t wealthy enough to self-fund your business, you can choose from a number of other funding options. These include a loan from the U.S. Small Business Administration, taking out a loan from a commercial bank, launching an equity crowdfunding campaign, or securing funding from an angel investor or venture capitalist group active in Connecticut.

An angel investor is a wealthy individual who invests their personal finances in a startup, typically in the beginning stages, whereas a VC is a group of investors that will fund a business throughout its existence.

Which route you choose depends on the specifics of your business: angel investors typically invest smaller sums to help get a startup off the ground, while VCs invest larger sums of money in exchange for a greater say in the operations of a business. Smaller startups usually opt to pursue funding from angel investors.

The state of Connecticut recently approved a five-year extension of the Angel Investor Tax Credit program, the longest extension in the program’s history, ensuring that investors’ incentive for funding local early-stage companies remains as strong as ever.

Connecticut Angel Investors and VCs

  • Connecticut Innovations – A venture capital fund that provides funding, consulting services, and invaluable business connections for Connecticut startups.
  • Landmark Angels – An angel investor group based in Greenwich, CT with over ten years of experience. In addition to providing equity capital for early and growth-stage companies, the group holds numerous investor forums each year around the country.
  • Topstone Angels – A private investment group that accepts pitch applications from early and mid-stage companies. Topstone Angels was founded by a woman and strongly encourages female entrepreneurs to apply for their services.

Additional Investor Resources

  • AngelList: Connecticut Angel Investors – A broad directory of over 5000 investors looking to invest in early-stage Connecticut companies. Listings include a brief bio of each investor, as well as their professional history, and a tally of investments they’ve made.
  • Entrepreneurship Foundation – A Connecticut-based non-profit dedicated to providing resources to area entrepreneurs and educators. Their site includes how-to guides and a directory of Connecticut incubators and co-working spaces.

5. Decide on a legal business entity

The form of business entity you choose will affect many factors going forward. There are 3 main options to decide from:

  • Sole proprietorship – The name for running a business by yourself. Legally, you and your business are one and the same, with no separate legal entity for your business.
  • Partnership – It is legally identical to a sole proprietorship, except that it comprises two or more people.
  • Corporation – A complex legal structure that is a separate entity (providing legal protection to owners) from the owner and comprises directors, officers, and shareholders.
  • LLC – AKA “Limited Liability Company”, this is a hybrid entity between a sole proprietorship and a corporation that possesses advantages of both. An LLCs provides the liability protection of a corporation, yet isn’t subject to double taxation as the profits go through your personal tax return.

Nowadays, LLCs are the option of choice for small business owners as they are easy to manage and provide the benefits of a corporation while lacking their complex structure. Taxwise, they operate more like a sole proprietorship.

You may want to consult with an attorney to help decide which entity works best for your business.

6. Register your business

After you’ve decided which type of business entity is right for your company, it’s time to officially register it with the state of Connecticut. First, use the Connecticut Business Registry Search to see if the name you’ve chosen for your business is available. If it is, you can proceed to the next time.

For sole proprietorships

If you are forming a sole proprietorship or general partnership, you do not need to register as a business entity. Instead, you should file your business name with your local/municipal clerk.

For LLCs and corporations

Those forming an LLC or corporation should visit the Connecticut Secretary of State website and follow the step-by-step instructions to register your business online. You’ll need to create an account in order to proceed. The type of form you must file depends on your chosen entity: forming an LLC requires Articles of Organization, whereas forming a corporation is done with Articles of Incorporation.

Appointing a registered agent is necessary for forming an LLC or corporation in Connecticut, as it is in all U.S. states. A registered agent receives process notifications and other government paperwork such as tax receipts on the business’s behalf. You can be your own registered agent as long as you have a Connecticut address, although many first-time business owners prefer to hire a professional, which can run you $50 to $300 per year.

Starting a business? Our number one pick is ZenBusiness

  • Start for $0 plus state fees
  • Fast & simple services
  • 100% accuracy guarantee
Visit ZenBusiness
northwest logo Northwest Registered Agent
  • Same day filing service
  • Affordable pricing
  • Strict ethical code
Visit Northwest
  • Your first year is free
  • Wide range of services
  • Technical support
Visit Incfile

Our picks for registered agent services

ZenBusiness aims to help business owners start, run, and grow their businesses. When you’re getting started, take advantage of the filing options, like setting up an LLC and business formation plans. Later on, you might want to take advantage of their registered agent services, domain name registration, or annual report filing. Start for $0 + state fees.

Northwest can help. You’ll need to file official documents to establish your business. The process is a little different in each state, but Northwest has offices all over the U.S. and helps business owners with this very thing every day. Northwest also offers registered agent services, annual report filings, and some free legal documents that pertain to starting a business.

Incfile offers a great library of material to help first-time business owners figure out what kind of business they should set up. From there, Incfile will aid with documentation and filing procedures and demystify terms like registered agent, articles of organization, and EIN. The company has a strong reputation and great reviews online too.

7. Acquire federal and state tax IDs

Now you should obtain a Federal Employer Identification Number (EIN), which is like a social security number for a business and allows you to open bank accounts, handle payroll, and file taxes.

For sole proprietorships, an EIN is optional, although it is required for corporations and LLC’s. You can apply online for your EIN through the IRS website, or fill out and mail this form.

Now, you must register with the Connecticut Department of Revenue Services to pay state taxes. The website provides a long list of conditions that require you to pay one or more state taxes, and it’s likely that your business fulfills at least one of them. Your online application will calculate the fee you must pay. In order to pay, you are required to provide your company ID and name, and payment must be made directly from a checking or savings account.

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8. Open business banking and credit accounts

Opening a bank account for your business is crucial because it allows you to separate company assets from your personal assets, and makes filing taxes a lot easier. This is a recommended step, even if you are operating a sole proprietorship.

It’s also a wise idea to obtain a credit card for your business because it will help you isolate business expenses and build up credit for your company, which may help in securing investment in later stages.

Banks operating in Connecticut good for small businesses

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9. Get the necessary licenses and permits

Depending on the type of business you are opening, you may need to apply for a number of permits and licenses to operate legally. For example, a restaurant will need a liquor license, and a pawn shop will need a reseller’s license. The paperwork may prove a hassle, but it’s a necessary ordeal that will protect you from fines, lawsuits, and other legal hazards.

Not all businesses in Connecticut require a license, although most do. You can search for information on the license(s) you need and how to get them with the Department of Consumer Protection. If you aren’t sure about which ones you’ll need, you can contact DCP (mail to [email protected]), explain the details of your business, and they will respond with a list of the necessary licenses and permits.

10. Choose a location

Whether you are running an online business or opening a restaurant, location is everything. Be aware of the demographics of the neighborhood or town that you are considering: Are the local residents likely to visit your business? Will nearby competitors take a share of your potential profits?

Several cities in Connecticut, including Norwalk, Stamford, and Fairfield, offer fine environments for starting a business. They boast growing economies and a high ratio of college-educated residents from which to draw employees.

11. Get insured

No matter what type of business you form, buying insurance coverage to protect yourself in the case of property damage or legal action is a good idea. In fact, businesses with employees are required by the federal government to have two types of insurance, while others are strongly encouraged or required at the state level, depending on your business type. Consult with a licensed insurance agent to find out which types of insurance you should get.

Required forms of insurance:

  • Workers’ compensation: Covers medical costs and disability benefits if an employee is injured or becomes ill on the job.
  • Unemployment insurance: Provides benefits to workers after a loss of job through no personal fault.

Recommended forms of insurance:

  • Professional liability insurance: Covers losses as a result of property damage, medical expenses, libel, slander, and negligence claims.
  • Commercial property insurance: Covers property damage to business-owned properties and possessions as a result of fire, theft, or storm.
  • Disability insurance: Provides short-term benefits for employees suffering an illness or injury. Required in certain states such as California, New York, and Hawaii.

12. Develop an internet presence

Establishing an identity on the web is an important investment in a business’s future development. Here are some key steps in the process:

  • Register a domain name for a company website (You can use, Bluehost,, Design the website and fill it with content. 
  • Create profiles on the popular social media services (Twitter, Facebook, Instagram)
  • Register a Google profile for your business
  • Create accounts on review sites such as Yelp, Google Reviews, and TripAdvisor

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Connecticut small business resources

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