Many entrepreneurs who plan to form a company or start a business in the United States often want to know how to structure their business to minimize taxes and liability. One popular business structure is a Subchapter S Corporation, or S-Corp. An S-Corp provides small and medium-sized businesses with the best of both worlds: the legal protection of a corporation and the tax benefits of a partnership. This article will guide you through the process of starting an S-Corp in Connecticut.
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Step 1: Choose a Name
Choosing a name for your S-Corp is the very first step in the registration process. The name you choose must be unique and distinguishable from all other business entities listed in the Connecticut Business Registry. It must also not violate any trademark or intellectual property rights. Once you have settled on a name, check for its availability on the Connecticut Secretary of State’s Business Registry (“CONCORD”).
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Step 2: Appoint Directors and Officers
In Connecticut, an S-Corp must have at least one director and one officer. You can either appoint yourself as the sole director or hire other experienced individuals who can provide valuable input on board matters, such as adoption of bylaws and appointment of officers. You may also choose to hire outside counsel or a CPA to help you navigate the complex process of registering your S-Corp.
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Step 3: File Your Certificate of Incorporation
After naming your S-Corp and appointing directors and officers, you’ll need to file your Certificate of Incorporation. To do this, complete the form provided by the Connecticut Secretary of State and attach the $120 filing fee. You can file online, by mail, or in-person at the Secretary of State’s Offices. The documents required include your completed Certificate of Incorporation, any required forms, and payment for the required fees.
Step 4: Draft Your Corporate Bylaws
The corporate bylaws govern the structure and operations of the S-Corp. You’ll need to adopt general corporate bylaws for your S-Corp, which will state the corporation's purpose and regulate its internal affairs, such as the allocation of shares of stock, meetings of directors and shareholders, duties of officers and the procedure to amend the bylaws. You can either draft protective bylaws or advisory bylaws that control the operations of your business.
Step 5: Elect S-Corp Tax Treatment
An S-Corp is not taxed at the corporate level; instead, profits and losses “pass through” to the shareholders. This means that the S-Corp’s income, deductions and credits are passed through to the shareholders based on their share of ownership. To elect S-corp tax treatment, file Form 2553 with the Internal Revenue Service (IRS). Ideally, this should be done before the 15th day of the third month of your tax year, or by March 15 if you’re a calendar year taxpayer.
Step 6: Obtain State and Local Licenses
Depending on the nature of your S-Corp business, you may need to obtain local and state occupational licenses, permits, or registrations to carry out your activities. Some occupations such as accountants, lawyers, or doctors are required by law to obtain specific business licenses. Therefore, check with local and state regulators to ensure you meet all their requirements. The State of Connecticut has an official website that contains information on occupational and business licenses, permits and applications.
In conclusion, starting an S-Corp in Connecticut requires careful planning and a thorough understanding of the legal and regulatory process. Once you have determined that an S-Corp is ideal for you, it’s essential to follow the steps outlined above to successfully establish your business structure and operate your economy as smoothly and effectively as possible. Remember to seek the advice of an expert if you’re still unsure of any aspects of starting an S-Corp in Connecticut. Best of luck to you!
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