Forming your business entity in Delaware—specifically, a corporation—gives you a lot of flexibility, but you may still need to follow local laws depending on what state you operate in.
Specifically, if you do business in Connecticut, you need to register with the state. We’ll walk through the process and simplify it. But first, how can you tell whether you’re legally doing business in Connecticut?
When to register as doing business in Connecticut
Delaware C corps—and all other corporations formed outside of Connecticut—are referred to as “foreign” corporations by the State.
Connecticut statutes do not specifically define what is considered doing business in the state. However, Connecticut statutes provide that the following activities would not require you to register with the State:
Defending or settling a lawsuit
Having a bank account in the state
Selling through independent contractors
When to register to collect sales tax in Connecticut
Every state has rules about when a company is required to pay sales tax. These are called sales tax nexus rules.
You can think of the nexus as a special version of that state’s border; if you perform certain business activities within that border, you fall into the state’s sales tax nexus, and you’re required to register for and collect state sales tax.
Typically, these actions take the form of buying and selling goods and services.
In Connecticut, the sales tax nexus rules only apply to sellers who sell physical goods or services to Connecticut residents.
Until 2018, selling or buying non-physical goods—like subscriptions to streaming services, SaaS memberships, etc.—did not, generally speaking, qualify you for sales tax nexus. After an important court ruling in 2018, that changed. Now, if you buy or sell non-physical goods or services in a state, you may fall within its sales tax nexus.
Connecticut sales tax nexus (physical goods and property)
If you have a physical presence in Connecticut, then you will likely need to collect and remit sales tax. The Connecticut Department of Revenue Services is not particularly clear on what physical presence in the state. Traditionally, you would be physically present in a state if you have warehouses, retail spaces, or employees and/or representatives of the business in the state.
You will need to pay sales tax as long as you have physical presence regardless of any minimum thresholds. You can learn more about physical presence for sales tax purposes through the State’s website.
Connecticut sales tax nexus (non-physical good and property)
The new state sales tax laws applying to non-physical (ie. internet) sales allow you to qualify for sales tax nexus even without physical presence or goods. In Connecticut, you need to cross a certain threshold to qualify.
You will need to collect and remit sales tax if you perform both of the following in a previous or current calendar year:
- Collect $100,000 or more in gross revenue from Connecticut
- Make 200 or more transactions into Connecticut
If you would like to take a deep dive, you can check out the State’s website.
As usual, this isn’t legal advice—just a guide. If you’re not 100% clear on whether you fall within Connecticut’s sales tax nexus, it’s best to confer with your legal counsel and/or an accountant that has expertise in Connecticut’s legal code and tax regulations.
How to register to do business in Connecticut
Select a name under which to do business. This doesn’t have to be the name you registered when incorporating in Delaware, but it can be.
- Fill out an application. You’ll need to file an Application for Certificate of Authority to the Connecticut Secretary of State along with a Delaware Certificate of Good Standing.
- Pay the fee. Now you pay the Connecticut Secretary of State a $385 filing fee.
- Submit your Application for Certificate of Authority.
- Wait. Processing typically takes two to four weeks.
Once you’re approved to operate as a qualified foreign business in Connecticut, you’ll need to comply with certain requirements.
Compliance has a qualified business in Connecticut
To stay in compliance and continue legally doing business in Connecticut, you need to meet two requirements: maintaining a registered agent and filing your annual report. On top of that, you will also need to pay a corporation business tax.
Registered agent in Connecticut
Your registered agent in Connecticut is your point of contact with local authorities. If you don’t have a physical address for your company in Connecticut, it may be advantageous to find a registered agent to receive state notices on your behalf.
Foreign corporations are required to have a registered office in Connecticut. The office cannot be a P.O. box, rather it must be a physical address of your registered agent or a licensed registered agent service.
Your registered agent will forward any important information, such as business mail, to you. There are a number of firms that contract out registered agents. They typically cost $50 – $100 per year.
Annual reporting in Connecticut
Every year, you must file a statement with the State, updating any changes to the company address or the composition of the Board and officers. You’ll include info like:
- The legal name of your business
- The name and address of your registered agent
- The names and addresses of board members, managers, and officers
The filing fee for the annual report is $435.
Paying your corporation business tax
Connecticut has a corporation business tax that functions similarly to a corporate income tax. A corporate income tax is a tax imposed directly on the income of your corporation. For more information on filing and paying your corporation business tax, please see the following guidance from Connecticut Department of Revenue Services.
Registering for sales tax in Connecticut
If you meet the requirements to collect sales tax in Connecticut, you will need to apply for a Connecticut sales and use tax permit. You can apply for a sales tax certificate online.
Hiring and paying employees in Connecticut
When you hire a new employee in Connecticut, federal and state laws require that you report new hires within 20 days of hiring them. You can report your new hires online.
Your payroll provider should be able to take care of paycheck withholdings, but it’s up to you to register as an employer with the State and set up an online employer account.
For a comprehensive guide of your responsibilities, Connecticut provides the following information.
The easiest way to register your business in Connecticut
To register your business in Connecticut, you’ve got to keep track of a lot of moving parts. Failing to file the right forms, provide the right information, or stay on top of compliance laws can lead to serious headaches.
Capbase makes it easy. When you incorporate your Delaware corporation on Capbase, we will generate the required information needed to register to do business in Connecticut and keep you up to date on any required filings.
The compliance calendar inside your Capbase account will notify you of upcoming fees, reporting, or other requirements, so you can keep your startup in good standing with Connecticut state officials. Try Capbase now.
Written by Capbase Staff
Capbase is a team of designers, engineers, and business professionals spread across 6 time zones on 3 continents united by our passion for dogs, coffee, and great software.
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