I want to start a small business, what are my first steps?
Your first step should be to attend the free SBDC Entrepreneur Education Workshop Series. These free workshops teach entrepreneurs what it takes to open and manage a successful business. Visit our workshop page to to find and register for upcoming workshops. Also, visit our Starting a Business page for additional steps to take when starting a business in CT.
How do I become successful at starting my own business?
MANAGE your business from start to finish. Careful planning is fundamental to success. The Small Business Planner includes information and resources that will help you at any stage of the business lifecycle. For further details visit the Small Business Planner.
How do I register my business name with the Secretary of State?
If you are going to do business as a limited partnership or a limited liability company under a name other than your own, you need to register your trade name with the Secretary of State. Once the name has been approved you then must register the name with your local Town Clerk. To register online with the Secretary of State go to: http://www.sots.ct.gov/onnlineapps.htm or call 860-509-6002. If your business is a sole proprietorship (owned and operated by an individual) or a general partnership, you do not need to register your business entity with the state. *NOTE: There may be state, city, or town permits or licenses that are required to operate your business. Also, your name should be registered with your local Town Clerk.
How do I know what licenses or permits I need for my business?
Several types of businesses and professions require state licensing. The Connecticut Licensing Information Center (CT-CLIC) is CT's gateway for business registry. The web site provides over 900 licenses, permits and registrations among 29 licensing agencies. It also provides contacts and links for downloadable forms. Smart Start is on the CT-CLIC website and provides simplification for businesses to become fully qualified with Connecticut laws. Free personalized assistance is available through Smart Start to assist businesses through the registration process. Visit CT-CLIC on the web at: www.ct-clic.com or contact Smart Start at (800) 392-2122 or e-mail: SmartStart@cerc.com.
What are the types of business structures?
There are four primary legal forms of business from which to choose from.
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A Sole Proprietorship is owned by an individual. Like other entities, it may have one or more employees. Operating a sole proprietorship means that the owner is personally responsible for all liabilities of the business. The owner reports net income or loss of the business as part of personal tax return.
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A Partnership is created when 2 or more people agree to share ownership of a business. This form of business allows the partners to share complementary skills and resources. The owners share, and pay personal taxes on, the net income or loss of the business. Each partner is responsible for the liabilities of the business.
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A Limited Liability Company (LLC) provides for member(s) limited liability; you elect how to report business results for tax purposes; i.e., sole-proprietor, partnership, corporation.
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The Corporate Entity enables the owners to have limited liability. Sometimes used to facilitate owners raising equity by selling shares of the company. Corporation may elect to be treated as C-Corporation or S-Corporation for income tax reporting purposes. If you become a C-Corporation, the corporate profits are taxed at the Corporate level and may be taxed again at the shareholder level when distributed to owners as dividends. S-Corporation reports business results in manner similar to partnerships, above.
How do I finance the start - up of a small business?
To determine your finance needs you should first prepare a business plan with financial projections. These projections should include a balance sheet, income statement, and cash flow statement. The proper business plan will help you identify your funding needs. Most small business start-ups are funded through personal resources which include savings, equity or loans from friends and family, home equity loans, cash value of life insurance, and any other personal resources.Banks will lend to some business start-ups if they comply with your business plan, your level of equity investment, the collateral you have to pledge to the loan, and your credit history. If the bank denies your request, ask the lender if they would consider a loan with a guarantee from the Small Business Administration (SBA). In addition, there are a number of local and regional economic development agencies that offer revolving loan funds.
I have heard that grant money is available, how can I find out more about it?
There are several web sites where you can search for grants. Grant money is rarely available for profit ventures as a source of capital. Follow the links below to learn about state and federal grants that may be available.
State and federal sponsored funding available to businesses statewide (organized by agency that administers the grant/fund)
SBA listing of grants available through the government
Do I need to obtain a Federal Identification Number?
An EIN, Form SS-4, also known as a federal tax identification number, is used to identify a business entity. Generally all businesses need an EIN. You can also call 1-(800)-829-4933 to get an EIN. Taxpayers can fax EIN requests by dialing the fax number to one of three IRS campus' that accept applications. You can find this information online at: www.irs.gov/smallbiz, click on New Businesses.
If I am self employed, how do I report my taxes?
Self-employed business owners are required to pay state and federal income taxes, Social Security, and Medicare based on the profits from the business. Profits in a proprietorship are determined before you draw compensation from the business. Once your liability for federal income tax and self-employment FICA exceeds $500, you will need to deposit the tax payments to the IRS. You can estimate and report your federal taxes by using the 1040-ES Form, and your state taxes by using the Form CT-1040ES. You can also derive an estimate of your tax liability from your most recently completed Schedule C (profit and loss statement for a proprietorship) or by completing a monthly profit and loss statement. Be aware that if you don't deposit the appropriate taxes for any individual quarter, or for the year, the IRS can and will impose stringent penalties and interest.. If you need these forms, contact your local IRS office or Business Answers for their Estimated Income Taxes and Self- Employment package.
How do I know what taxes are required by the State for my businesses?
The Connecticut Department of Revenue Services is the agency responsible for tax laws and collecting state tax revenues. Sample Taxes collected are Sales and Use Tax, Corporate and Personal Income Tax, Business Entity Tax, Admission Tax, Dues Tax, etc. They provide useful information on their website at: www.ct.gov/drs. Their phone number is (800) 382-9463. Employers are also required to register with the Connecticut Department of Labor (DOL) for payment of unemployment and workers compensation taxes. The DOL website is: www.ct.gov/dol and phone number is: (860) 263-6000.
How do I know what taxes are required by the Government for my businesses?
Like state income tax, the method of paying federal income tax depends on your legal form of business.
- Sole Proprietorship: You must file IRS Federal Form Schedule C along with your personal Federal Income Tax return (Form 1040) and any other applicable forms regarding gains/losses.
- Partnership: You must file a Federal Partnership Return (Form 1065). Only shows gross and net earnings of profit/loss. Also, each partner must report his/her share of partnership earnings on his/her individual Form 1040 based on the information from the K-1 filed with the Form 1065.
- Corporation: You must file a Federal Corporation Income Tax (Form 1120) Return. You will also be required to file a personal federal income tax return (Form 1040) on your earnings from the corporation based on the W-2 received from your employer.
How do I obtain Business Insurance?
Business Insurance protects the contents of your business against fire, theft and other losses. Contact an insurance agent or broker of your choice. Common types of insurance are Liability Insurance, Property, Business Interruption, Key Man, Automobile, Officer and Director and Home Office.
