This article is original content written by Thomas Scanlon, CPA, CFP® of Manchester, CT.
1) Meet With Your CPA and Attorney
The first step is to meet with your CPA and Attorney. Your CPA should be able to review your business plan and provide feedback. Additionally, your CPA should be able to advise you with regards to what entity you should have. Your attorney will get your business registered with the Secretary of State and provide all of the legal documents for your business.
2) Decide on Your Choice of Entity
A new business with have a range of choices for their entity. Many home based businesses may start as a sole-proprietor. This is not recommended due the unlimited liability associated with these entities. The primary options include a Limited Liability Company (“LLC”) or a Corporation. If you choose a Corporation you should consider making a Subchapter S Election.
3) Apply For Your Tax Identification Numbers
A new business will need to obtain a federal tax identification number. This application is made on IRS Form SS-4. This request for Tax Identification Number and be obtained online, via fax or regular mail. This Federal Tax ID number is needed to open the business bank accounts. In Connecticut you will also need to register with the Connecticut Department of Revenue Services. This is done on Form REG-1. This will also register you for sales tax and income tax withholding, if needed. Connecticut employers will also need to obtain a Tax Identification Number with the Connecticut Labor Department. This is done on Form UC-1A.
4) Obtain the Appropriate Insurance
Having a business brings with it a certain amount of liability. You will need to protect yourself with the appropriate amount of insurance. The first policy to consider is a general liability policy. If you have employees, you will need workers compensation insurance. Additionally you may want to offer health insurance to your employees. Finally, if you have partners or other stockholders, you may need life insurance in connection with a buy-sell agreement.
5) Set Your Alarm Clock
As Forrest Gump said, “Shrimpin’ is tough.” Amen. So is opening a business in Connecticut these days. You’re going to need to set your alarm clock. Early. Every Day.
Have You Opened a Business in Connecticut? Call and schedule a R.O.S. (Risks, Opportunities & Strengths) meeting with us! (860)646-2465
We are not rendering legal advice. Consult your attorney for legal advice.
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Tom Scanlon has over thirty years experience in public accounting with an extensive background in the areas of financial, tax, and estate planning. He prides himself on providing in-depth and customized solutions to privately held businesses and their owners. He is a Certified Public Accountant and Certified Financial Planner®. Tom is a frequent speaker for area organizations and has recently been quoted on CNBC, Fox 61 News and AARP's blog. Tom also has been a guest columnist for numerous publications including The Wall Street Journal, Barron's, Money Magazine, The Hartford Courant, The Hartford Business Journal, and The New Haven Register. He is a member of the American Institute of Certified Public Accountants, the Connecticut Society of Certified Public Accountants, and the Financial Planning Association. Active in the community, Tom supports a variety of not-for-profit organizations.
The business entity tax (BET) is an annual tax of $250 imposed on the following business types:• S corporations (Qualified subchapter S subsidiaries (QSSS) arenot liable for the BET.);• Limitedliability companies (LLCsorSMLLCs)thatare,forfederalincome tax purposes, either:• Treated as a partnership, if it has two or more members; or• Disregarded as an entity separate from its owner, if it has asingle member; • Limited liability partnerships (LLPs); and• Limited partnerships (LPs).
Kerry,
Thanks for pointing that out. The “BET” will apply to the entities you identified.
Regards,
Tom
Hey thank you Thomas for this article, it was very helpful. I live in California however, but this still gave me a good idea on what needs to happen overall when starting up a business.
Jasmine,
Thank you for the kind words.
Regards,
Tom
I don’t get the last one… Set your alarm click… Meaning because of all the regulations CT has or just as a general rule of running a business?
Nate,
Just as a general rule of running your business.
It’s going to be a lot of hard work.
Tom