Connecticut LLC Advantages and Disadvantages:
Connecticut LLC Advantages and Disadvantages
- A Connecticut LLC formation establishes a legal presence for conducting business within the state, plus your connecticut LLC will now qualify for the privileges and protections afforded by Connecticut state law. One of these protections for your Connecticut LLC is that its affairs, obligations, future liabilities are strictly separated out from the personal assets of you and your members. Creditor actions related to your Connecticut LLC cannot transfer corporate liability to members, who are only liable for their invested capital.
Should I form a Connecticut LLC?
A Connecticut LLC satisfies a necessary condition of your business planning developement in that it meets the requirement that you establish a legal form of organization in order to gain the statutory benefits and protection available in Connecticut to your LLC. Your Connecticut LLC establishes a legal presence within the state, which you can use either as a platform for in state operations or by registering your Connecticut LLC via your agent's physical address in order to meet the purely statutory requirement for tax and filing purposes absent an in state operation.
Advantages and Disadvantages of a Connecticut LLC
Advantages of LLC
- Limited Liability: Owners of a LLC have the limited liability protection of a corporation.
- Flexible Profit Distribution: Limited liability companies can select varying forms of distribution of profits. Unlike a common partnership where the split is 50-50, LLC have much more flexibility.
- No Minutes: Corporations are required to keep formal minutes, have meetings, and record resolutions. The LLC business structure requires no corporate minutes or resolutions and is easier to operate.
- Flow Through Taxation: All your business losses, profits, and expenses flow through the company to the individual members. You avoid the double taxation of paying corporate tax and individual tax. Usually, this will be a tax advantage, but circumstances can favor a corporate tax structure.
Disadvantages of LLC
- Limited Life: Corporations can live forever, whereas a LLC is dissolved when a member dies or undergoes bankruptcy.
- Going Public: Business owners with plans to take their company public, or issuing employee shares in the future, may be best served by choosing a corporate business structure.
- Added Complexity: Running a sole-proprietorship or partnership will have less paperwork and complexity. A LLC may federally be classified as a sole-proprietorship, partnership, or corporation for tax purposes. Classification can be selected or a default may apply.
By Connecticut and other state law in order to proceed with forming a llc, you need to prepare a written abstract detailing
your llc purpose, the names of your initial Connecticut LLC members, the name and address of your Connecticut registered agent, the details of which will be introduced into the body of your LLC operating agreement and related Connecticut LLC formation documents assembled for application to the state of Connecticut.
Connecticut’s 2011 Business Tax Climate Ranks 47th
Connecticut ranks 47th in the Tax State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. Neighboring states rank as follows: New York (50th), Massachusetts (32nd), New Hampshire (7th), Vermont (38th) and Rhode Island (42nd).
Connecticut's Individual Income Tax System
Connecticut's personal income tax system consists of three separate brackets with a top rate of 6.5% kicking in at an income level of $500,000. That top rate ranks 19th highest among states levying an individual income tax. In 2008, state-level individual income tax collections were $2,002 per person, which ranked highest nationally.
Connecticut's Corporate Income Tax System
Connecticut's corporate tax structure consists of a flat rate of 7.5% on all corporate income. Among states levying corporate income taxes, Connecticut's rate ranks 22nd highest nationally. In 2008, state-level corporate tax collections (excluding local taxes) were $153 per capita, ranked 20th highest among states that tax corporate income.
Connecticut Sales and Excise Taxes
Connecticut levies a 6% general sales or use tax on consumers, above the national median of 5.85%. In 2007 combined state and local general and selective sales tax collections were $1,424 per person, which ranked 21st highest nationally. Connecticut's gasoline tax stands at 41.9 cents per gallon (4th highest nationally), while its cigarette tax stands at $3.00 per pack of twenty (2nd highest). Additionally, Connecticut levies a 5.8% gross receipts earnings tax on oil companies, which is collected at wholesale. The sales tax was adopted in 1947, the gasoline tax in 1921 and the cigarette tax in 1935.
| Connecticut LLC advantages and disadvantages