Connecticut’s scenic coastline, rich historical significance, and prestigious schools make it an enticing location for new business owners and entrepreneurs. These attractions and facilities provide a large group of customers who are always nearby.

Understanding Connecticut’s current business demographics can help determine if this is the right place for your business.

As of 2023, 99.3% of all companies run in Connecticut are small businesses. Connecticut’s supportive business environment enables these businesses to find success.

Connecticut has one of the lowest growth rates for women-owned businesses. Of the 347,694 small businesses in Connecticut, women fully own 128,122 and co-own 15,155 enterprises. Women own just under half of all companies, demonstrating that despite the low growth rate, Connecticut has strong potential for more women-owned firms to form.

Veterans own 15,288 businesses and co-own 2,379 with non-veterans in Connecticut. While their businesses may be fewer, veterans succeed by bringing teamwork, discipline, and leadership from their military service into the business world.

Hispanic people can also succeed in Connecticut, with the population owning 34,491 businesses and co-own 1,045. The number of Hispanic-owned businesses has increased from 31,067 in 2022, showing potential for future growth.

Racial minorities own 78,178 and co-own 1,882 businesses in Connecticut. This increase is impressive from the 70,200 companies owned in 2022.

Why incorporate in Connecticut?

Our studies show that Connecticut can be one of the more difficult states to start a business. The state’s high operation costs and tight corporate regulations can turn some small business owners away. Despite this, many business owners decide to incorporate in Connecticut for its many benefits, including:

Tax benefits

Connecticut business owners may be allowed extra tax benefits or credits when they incorporate their company. These benefits reduce the overall tax bill for businesses in specific industries. 

For example, businesses that invest in creating new products can apply for Research and Development (R&D) tax credits. The Enterprise Zone Program is another tax break program that reduces taxes for specific areas in Connecticut.

Certain business entities, such as LLCs, may also be further exempt from taxes. The IRS does not consider LLCs taxable entities, allowing the company to decide how it wants to be taxed.

Limited liability protection

Connecticut protects Limited Liability Company (LLC) and corporation owners’ assets if the business faces debt or legal claims. Because companies are considered separate legal entities, a lawsuit cannot collect shareholders’ assets to cover corporate debt.

More professional appearance

Incorporating a business can make it appear more professional in the eyes of the public. This reputation will make it a more trustworthy option for potential customers.

Incorporated businesses have easier access to funding from loaners and investors. Third parties are more willing to work with an incorporated company because they appear more reliable than sole proprietorships or partnerships.

Many new business incentives

To help support small businesses, Connecticut offers different programs to fund minority-owned and new companies. 

These four statewide programs aim to help small businesses grow and succeed. Many of these programs prioritize companies located in distressed municipalities. The programs also prioritize women, disabled, minority, or veteran-owned businesses.

Business tax climate info stats
47	6.99%	7.50%	6.35%	0	6.35%
Overall rank	Individual income tax	Corporate income tax rate	State sales tax rate	No local sales tax rate	Combined state & average local sales tax rate

Overview of business structures in Connecticut

Business structure	Management	Liabilities	Taxes
Sole proprietorship	One person manages everything	The owner is responsible for all company debts	The owner pays taxes on personal income
Partnership	Two or more people manage together	Partners are personally responsible for debts	Partners pay taxes on personal income
LLC	Managed by one or more members or managers	Business debts do not affect personal assets	Can choose which business entity to be taxed as
S corp	Managed by shareholders and directors	Business debts do not affect personal assets	Business income passes through to shareholders, who pay taxes
C corp	Managed by shareholders and directors	Business debts do not affect personal assets	Business pays their taxes, and shareholders pay on dividends
Nonprofit	Managed by a board of directors	Business debts do not affect personal assets	Exempt from federal and state taxes if approved

How do I incorporate in Connecticut?

All new business owners must understand the laws and regulations of the state they are incorporating. Ensuring a business is correctly incorporated helps prevent the owner from encountering legal problems later. 

Deciding whether you want to form an LLC, C corp, S corp, or nonprofit is a crucial choice to make before going through the incorporation process.  Each structure has different benefits, and some may suit your business better. It is a good idea to contact a professional if you have any questions about legal advice for your business.

Once you decide to incorporate, MaxFilings professionals can guide you through the process.