|
|
|
STARTING AND OPERATING A BUSINESS IN CONNECTICUT Copyright © 2000, Michael D. Jenkins
CONTENTS OF THIS SECTION:
I. INTRODUCTION I. INTRODUCTION Connecticut has a fairly typical tax and legal structure under which businesses must operate. Like most states, Connecticut imposes an income tax, a franchise tax on corporations, a sales and use tax, various excise taxes, with property taxes imposed at the local level. The state has also adopted a limited liability company (LLC) law and a limited liability partnership (LLP) law, so that businesses operating in Connecticut in LLC or LLP form may obtain the advantages of limited liability, without incorporating or becoming subject to corporate taxation, generally. Effective for deaths occurring on or after January 1, 1997, Connecticut began phasing out its state inheritance tax, and it will be completely phased out by January 1, 2001. In addition, the entity-level income tax on S corporations will be phased out completely for income years beginning after December 31, 2000. However, since 2002, a $250 minimum corporate tax has been imposed, and a $250 annual surcharge or "business entity tax" imposed on limited liability companies, limited liability partnerships, limited partnerships, and S corporations ($350 for tax year 2003). It does not apply to other unincorporated entities, such as sole proprietorships or general partnerships. At present, the state's economy is very robust and is picking up steam, in terms of the level of unemployment and other economic measures. For example, in January, 2000, the state's unemployment rate had dropped to 2.2%, even lower than the low 4.0% national rate. On the other hand, the state has a very high cost of living, compared to national averages, and a recent (1999) U.S. Census report on state taxation showed that Connecticut had the highest per capita state tax burden of any state, at $2,869 per capita in 1998, compared with the national average of $1,762. To view the latest federal Bureau of Labor Statistics unemployment rate data for Connecticut or any other state, visit the BLS website. II. LEGAL ENTITIES -- FILING FEES AND REPORTING REQUIREMENTS. (a) In General. A business that operates in Connecticut can operate as a sole proprietorship, a general or limited partnership, a corporation, or a limited liability company. However, unlike most other states, Connecticut until recently did not exempt S corporations from income taxes, except on certain separately stated income on the federal S corporation return. Under legislation enacted in 1996, the entity-level tax on S corporations is being phased out entirely, effective for income years after the year 2000. Connecticut law also provides for limited liability partnerships, in which no partner is liable for debts of the partnership, in general, as in the case of a corporation or LLC, but with fewer legal formalities than are required for either a corporation or an LLC. Each of the above entities is discussed below, along with the basic requirements for forming such an entity and any general ongoing (non-tax) reporting requirements that are applicable to it. The tax treatment of each form of legal entity is discussed in Section IV below. (b) Sole Proprietorships. In general, sole proprietorships in Connecticut can be formed with no formalities. However, as discussed in Section IV(b), it will generally be necessary to obtain one or more local business licenses from cities or counties in which you operate and, in some cases, state licenses, as well. No separate tax form filing is required, generally, for a sole proprietorship, under the Connecticut income tax law. Instead, as with the Schedule C on your federal Form 1040, you simply report the net income or loss from your sole proprietorship on your state personal income tax return. See Section IV(c) for information on the Connecticut income tax and filing requirements for individuals. As a sole proprietor, if you have no employees, you are not required to pay any unemployment taxes, withhold any federal or state income tax from wages, nor obtain workers' compensation coverage for yourself. (c) Partnerships. As a rule, general partnerships in Connecticut can be formed with no formalities, although it is highly advisable to have a written partnership agreement. However, as discussed in Section IV(b), it will generally be necessary to obtain one or more local business licenses from cities or counties in which you operate and, in some cases, state licenses, for any type of partnership, including general or limited partnerships, or limited liability partnerships. A limited partnership, in which there is at least one general partner (who is liable for partnership debts) and at least one limited partner (who is not liable for partnership debts), may also be formed under Connecticut law. Unlike a general partnership, a limited partnership must generally have a written partnership agreement, and must file a certificate of limited partnership with the secretary of state, along with a $60 filing fee. Foreign limited partnerships, those formed in in another state, are required to register with the secretary of state and also pay a $60 fee. Limited partnerships must file annual reports and pay an annual $10 fee. For information on limited partnership filing requirements, see the contact information for the offices of the Connecticut Secretary of State, listed in Section VI(a). Limited liability partnerships (LLPs) are a form of partnership permitted under the laws of Connecticut since 1996. Like an LLC, an LLP provides limited liability for its owners, while retaining the tax advantages of a partnership for federal and Connecticut state income tax purposes. However, unlike an LLC, an LLP typically operates like a regular partnership, and is not required to file articles of organization. To form an LLP in Connecticut, you must register your partnership with the secretary of state and pay a filing fee of $60. Foreign LLPs, those created under the laws of another state, must file for a certificate of authority to do business in Connecticut and they also pay a fee of $60. Every LLP doing business in Connecticut, including both domestic and foreign LLPs, must file an annual report with the secretary of state and pay a fee of $10. For more information on LLP registration and reporting requirements, see the contact information for the offices of the secretary of state, listed in Section VI(a). Note that one potential drawback of LLPs, if you will do business in other states besides Connecticut, is that some states, like California and New York, only recognize certain types of professional partnerships as LLPs. If yours is not a professional partnership, such other states may simply treat your LLP like an ordinary general partnership, with no limitation of liability. A partnership agreement, for any type of partnership, should spell out in considerable detail such matters as the following:
Partnerships, as entities, are not subject to state income tax in Connecticut. Instead, the income or losses of the partnership, as allocated among the partners, must be reported on the personal income tax returns of the individual partners (or on the corporate tax returns of any corporate partners). Partnerships are required to file an annual tax information return with the state. For details on Connecticut partnership tax return filing requirements, see Section IV(c). (d) Corporations. To form a corporation in Connecticut, you must file a certificate of incorporation with the secretary of state and pay a fee of $50, plus a fee for a certified copy of the certificate. A foreign corporation (one formed under the laws of another state or a foreign country), must obtain a certificate of authority before it may legally conduct business in Connecticut, by filing an application for a certificate of authority and paying a filing fee of $50. It must also pay a license fee of $225 at the time of incorporation and each subsequent year it does business in the state. In addition to the filing fee, a domestic corporation must pay an initial franchise tax based on the number of its authorized shares of capital stock. The franchise tax is a penny a share for the first 10,000 shares, and decreases on larger numbers of shares, with a minimum fee of $150. For more information on filing a certificate of incorporation or applying for a certificate of authority to do business in Connecticut, see the contact information for the offices of the secretary of state, listed in Section VI(a). In addition, once your corporation is formed, it will be required to file annual reports and domestic corporations must pay a franchise tax, based on the number of authorized shares of stock, plus a $75 filing fee, with each annual report. Foreign corporations also pay an annual $225 license fee plus a $75 fee with each annual report. Failure to file this report on a timely basis can result in the suspension or revocation of your corporation's charter. In its discretion, the secretary of state may require corporations to file biennial reports, rather than annual reports. Besides paying federal income taxes on its income, a corporation that does business in Connecticut must also file corporate income tax returns with the state. See Section IV(c) for a discussion of state corporate income tax rates and tax return filing requirements. As noted above, domestic corporations in Connecticut are also subject to a corporate franchise tax based on the number of authorized shares of stock, ranging from 1 cent per share for the first 10,000 shares to as low as 1/5th ($0.002) of a cent per share on more than one million shares. The minimum franchise tax is $150. Any subsequent increases in authorized shares, subsequent to incorporation, will result in additional franchise tax. For tax forms and more information on corporate income and franchise taxes in Connecticut, see the contact information for the offices of Taxpayer Services, Connecticut Department of Revenue Services, listed in Section VI(a). (e) S Corporations. An S corporation is simply a regular corporation that has elected, for federal or state income tax purposes, or for both, to be taxed somewhat like a partnership, with its income, losses and tax credits flowing through to its owners, who report such income, losses, or credits on their individual tax returns. Connecticut does not generally recognize S corporations for income tax purposes at present, as it imposes a regular corporate income tax on an S corporation's income (on 30% of its income in 2000). However, this entity-level tax on S corporations will be phased out entirely after the year 2000. S corporations file annual returns on Form CT-1120SI. (f) Limited Liability Companies. Connecticut, like every other state, has now adopted a limited liability company (LLC) law. Thus, in addition to the traditional choices of a sole proprietorship, partnership, or corporation, a business that operates in Connecticut may also choose to operate in the form of an LLC. In most states, LLCs are very attractive entities for many small businesses, in that they offer the same protection as a corporation from creditors for debts of the business, while offering much of the flexibility plus the flow-through tax treatment of a partnership for federal tax purposes. See Section IV(c) for a discussion of the income tax treatment of LLCs under Connecticut tax laws. To form an LLC under the laws of Connecticut, it is necessary to file articles of organization with the secretary of state, which must be accompanied by a filing fee of $60. State law in Connecticut formerly required an LLC to have at least two members, but the law was changed, to authorize the creation of 1-member LLCs in the state, effective since May 27, 1997. Foreign LLCs, those formed under the laws of another state, must obtain a certificate of authority to do business in Connecticut, by filing an application for a certificate of authority with the secretary of state and paying a filing fee of $60. In addition to initial filing fees, an LLC formed in Connecticut or a foreign LLC must subsequently file annual reports with the secretary of state and pay an annual report filing fee of $10 with each such annual report. For more information on filing articles of organization for an LLC, see the contact information for the offices of Connecticut Secretary of State, listed in Section VI(a). III. BUSINESS ACQUISITIONS (a) In General. When acquiring an existing business, there are a number of state legal and tax issues you or, preferably, your business attorney, should attend to before closing the purchase. These include matters such as doing a title search for any real property that is being acquired, checking for any recorded security interests on personal property items, and thoroughly researching county, state, and federal records for any judgment liens, tax liens, or other liens, before property is acquired. You will also benefit from consulting a tax advisor before the agreement of sale is negotiated, in order to seek a structuring of the agreement so that the purchase price is allocated among the assets in a way that favors you. You may be able to obtain considerable tax savings if the purchase price is allocated in a way that gives you the best possible tax results under federal and state income tax laws, and other state tax laws, such as sales/use tax or property tax laws. Depending upon the state (or states) in which the seller's assets are located, you may also have to comply with state bulk sale or bulk transfer laws. You should also obtain tax releases from various state taxing agencies, as discussed below. (b) Bulk Sale Laws. Typical bulk sale laws require either publication of legal notices to all creditors in advance of the sale and recording of such notices in some cases, or maintenance of detailed lists of the property to be transferred, for inspection by the public. Connecticut is one of the states that has repealed its bulk sale laws, so you no longer have to be concerned with this requirement when buying a business in Connecticut. (c) Tax Releases. When you acquire an existing business, you will want to make sure that you do not unwittingly become liable for any unpaid taxes owed by the seller. Typically, to protect yourself, you will need to receive a tax release or releases from various state taxing agencies, for such taxes as sales and use tax, income tax withholding, and state unemployment taxes, in each state in which the seller does business. If you fail to obtain such a release or written statement from the tax agency that the seller is not delinquent on any tax payments, you will be held responsible for such tax if it is not withheld from the purchase price proceeds and paid to the state at the time the sale of the business transpires. In Connecticut, you should obtain s sales tax certificate of clearance from the Connecticut Department of Revenue Services, which will provide proof that the seller has paid all sales tax due. An unemployment tax clearance or release is not necessary, since you are not liable for the tax owed by the seller unless you choose to assume such liability. If you do choose to assume such liability, you will be able to reduce the amount of wages paid by the seller from the annual wage base for employees you acquire in the transaction, however. With the seller's permission, you may obtain a summary from the Connecticut Department of Labor of whether the seller has filed reports and paid unemployment taxes due. Contact the Connecticut Department of Labor for further information, or consult your attorney or CPA as to how you should proceed with regard to obtaining an unemployment tax release. (d) Unemployment Tax Rating of Seller. In addition to obtaining tax releases, you may find it advantageous to succeed to the seller's unemployment tax experience rating, if the seller has a tax rate lower than you would otherwise obtain as a new business. To obtain the seller's favorable experience rating as a successor employer, you will need to apply on a timely basis to the Connecticut Department of Labor, requesting that you be treated as a successor employer. IV. CONNECTICUT TAXES AND OTHER GENERAL REQUIREMENTS. (a) In General.
Connecticut's tax system
is relatively complex, and has gone through a number of major
changes in recent years, including the repeal of the old
individual income tax, which applied only to capital gains
and income on investments, which was replaced in 1991 with a
general income tax, but at a low rate of only 4.5%. This
rate was increased to 5%, beginning in 2003.
While its corporate tax rate (11.5% until recently) was one
of the highest in the country, it was reduced to 10.75% in
1996, and has gradually dropped to 7.5% for income years that
began after December 31, 1999. Alternatively, a corporation
pays a tax on its capital equal to 3.1 mills (.0031) per
dollar of capital, if higher than the tax on income.
A business entity tax applies to all limited liability
entities, except for C corporations (corporations other than
S corporations). The tax is an annual fee of $250 imposed
on limited partnerships, limited liability partnerships,
limited liability companies, and S corporations.
Connecticut is one of the few states that does not have
any local sales taxes. There is also no state personal
property tax and, although there are local property taxes
on business personal property, an exemption is provided
for retail, wholesale, and manufacturing inventories.
After July 1, 2004, taxpayers whose prior year tax
liability exceeds $10,000 for a particular tax are required
to make payment of the tax by means of electronic funds
transfer (EFT).
(b) State and Local Licensing. Nearly any business, operated anywhere in the United States, will have to have at least one government license of some kind. In most cases, this will be a local license, issued by your city or county. Before you open your business, contact your local city or county hall and find out if your particular business needs one or more local licenses. Most kinds of local business licenses are granted upon payment of a fee, with no further requirements, except possibly for annual or other periodic renewal fees. However, if you are engaging in any kind of food business, you will usually need to also obtain a health department permit and show that you are in compliance with health department food-handling requirements. In addition, be sure to check with an attorney or local government zoning or planning department officials to determine if your business will be in compliance with all local zoning and planning restrictions. If you own or rent any type of facility, you will generally need fire department permits, showing that you meet fire safety codes and any construction or improvements to an existing structure will usually require a building permit. If you intend to simply operate your business from your home, you may be in violation of local zoning requirements, but this is less likely to be a concern if you don't have clients, customers, suppliers, or employees coming to your house on business, on a regular basis. State governments have also traditionally required special licenses for many kinds of professionals, such as physicians, dentists, lawyers, and accountants. To further protect consumers, Connecticut has expanded the list of occupations that must be licensed by the state to include many other occupations. Most state licenses not only require payment of fees, but are only issued for a given profession or occupation upon showing that you have completed certain educational or experience requirements, or passed certain tests, or some combination of the foregoing. For information on state licensing and business registration requirements in Connecticut, see the contact information for the offices of Smart Start business services section of the Connecticut Department of Economic and Community Development, a "one-stop" agency listed in Section VI(a). (c) Income and Franchise Taxes. Connecticut has both an individual income tax and a corporate income tax, as well as a franchise tax on corporations. The Connecticut individual income tax is imposed at a maximum tax rate of 5% in 2003 and later years. Individual taxpayers generally pay state income tax on their business earnings from a sole proprietorship, or on their share of the earnings of a pass-through entity, such as a partnership, S corporation, or LLC. The Connecticut personal income tax return is Form CT-1040, which must be filed with Taxpayer Services, Connecticut Department of Revenue Services. Effective as of May 6, 2004, all such pass-through entities doing business in Connecticut, which have nonresident owners (partners, S corporation shareholders, or LLC members), must either file a group return for the nonresident partners or else pay taxes at the highest marginal tax rate on each nonresident owner's share of the pass-through entity's taxable income. Partnerships, or entities taxable as partnerships, such as LLCs, are not subject to state income taxation in Connecticut, but must file an information return with the Connecticut Department of Revenue Services each year, showing each partner's share of taxable income, losses, and credits, on Form CT-1065. However, since 2002, LLPs and limited partnerships have been subject to an annual $250 surcharge or "business entity tax." Individual taxpayers doing business as sole proprietors, or who are partners in partnerships, or members of LLCs, are required to make payments of estimated Connecticut individual income taxes if their net tax liability (not covered by withholding) exceeds $1000. Estimated tax payments are due in four installments, on the 15th day of the 4th, 6th, and 9th months of the taxable year, and the 15th day of the first month of the following year. To avoid penalties for underpayment of estimated tax, you must either pay in 90% of the current year's tax, or 100% of the previous year's tax, or else make installment payments computed under an annualized income approach. Corporations doing business in the state must file corporate income tax returns by the first day of the fourth month following the end of their taxable year. (April 1 for a calendar year corporation.) The Connecticut corporate income tax rate is 7.5% on corporate income in 2000, (or, if higher, a tax of 3.1 mills per dollar of capital, up to a maximum tax of $1 million). There is a minimum tax of $250. For tax years beginning on or after January 1, 2004 and before January 1, 2005, the corporate tax is increased by a 25% surcharge for all corporations except those paying only the minimum tax. Corporations are required to make estimated tax payments of their state corporate income tax in advance, if their tax liability for the year exceeds $1,000. Estimated tax payments are due in advance, in four unequal installments, 30% on the 15th day of the 4th month, 70% on the 15th day of the 6th month, 80% in the 9th month, and 100% in the 12th month of the taxable year. The total estimated tax that must be paid in is usually equal to 90% of the actual tax liability for the year. A "safe harbor" rule is provided, so that there is no penalty if a corporation pays in a specified percentage of its prior year tax liability. For 1999, the percentage was 125% of the prior year tax, and is 100% in 2000 and subsequent years. Penalties will be imposed for failure to make the required estimated tax payments on a timely basis. Entity-level taxes are being phased out for S corporations, which are taxable on only 55% of their net income in 1999, on 30% in 2000, and are not taxed at all in 2001 or subsequent years, except for a $250 annual surcharge or minimum tax that applies each year since 2002. In Connecticut, a limited liability company (LLC), will be taxed in the same manner as for federal purposes, as a partnership or, in the case of a 1-person LLC, as a sole proprietorship, thus avoiding the possible double taxation of income that can occur with a corporation. However, since 2002, LLCs are subject to an annual surcharge or "business entity tax" of $250 ($350 in 2003). (d) Sales and Use Tax. Connecticut imposes a general sales tax on retail sales of tangible personal property and on certain types of services at the statewide rate of 6%. Local governments are not allowed to adopt local sales taxes. Sellers are required to obtain a seller's permit and to collect and pay over sales and use taxes to the Department of Revenue Services. There are numerous exemptions from the sales tax, the most important of which is the resale exemption. If you are a wholesaler or retailer who purchases goods that you will resell, your purchase of such goods may qualify as an exempt sale for resale. Similarly, if you sell goods to wholesalers or retailers for resale by them, your sale may also qualify as an exempt sale for resale. In any such transaction, the exemption is ordinarily available only if the purchaser gives the seller a valid resale certificate, certifying that the items are being purchased for resale, and not for use or consumption by the buyer. In addition, sales tax has begun phasing out on certain services, such as tax preparation, data processing services, health and athletic services, and environmental services, as well as on certain types of services performed on residences, such as paving, painting, wallpapering, roofing and siding work. Internet services are also exempt from sales and use taxes, effective since July 1, 2001. A parallel tax, the use tax, is also imposed at the same rate as the sales tax. It is primarily intended to tax property that is acquired from sources outside of the state, in transactions not subject to sales tax, when such property is used or consumed within Connecticut. Use tax may also apply to items purchased on an exempt basis, such as for resale, if such items end up being used or consumed, instead of being resold. Before making any taxable sales, you will need to register with the Department of Revenue Services on Form REG-1. Sales tax permits issued on or after October 1, 2003 are valid for five years (formerly two years), but the sales tax permit fee was increased from $20 to $50. For more information on Connecticut sales and use tax registration and compliance, see contact information for the offices of the Department of Revenue Services, listed in Section VI(a). (e) Real and Personal Property Taxes. In Connecticut, as in every other state, any business real estate you own will be subject to real property taxes. In general, there is little that you must do, unless you wish to challenge your assessed valuation, since the assessor will bill you for each year's property taxes as they come due. Connecticut also imposes personal property taxes on tangible personal property. However, certain business personal property, such as business inventories, are exempt from personal property tax in Connecticut. If you have personal property, you must file an annual personal property tax return with the town assessor (on or before each November 1 in most localities). While Connecticut generally taxes tangible personal property, it does not generally impose property taxes on intangible property, and state law specifically exempts some types of intangible personal property, such as cash on hand, stocks of a corporation whose property is taxable, and computer software. (f) Other Business Taxes. Connecticut imposes a number of other taxes on businesses that may apply to you, including:
Note, with regard to the conveyance tax, that the Connecticut Supreme Court has ruled that a transfer of real estate to a limited liability company by the sole owner of the LLC, as an asset contribution, is not subject to the real estate conveyance tax. Mandell v. Gavin, Conn. Sup. Ct., Docket No. SC 16672, March 18, 2003. (g) Trade Names. A trade name, also known as a fictitious or assumed name, is any name used in the course of business that does not include the actual legal names of all the owners of the business. Thus, if your business goes by any name other than your own real name, it is operating under a trade name. The same is true of a corporation, if it operates under a name other than its legal name. A trade name might also be one that suggests the existence of additional owners, by using such words as "company," "associates," or "group." In most states where you do business, it will be necessary to register a trade, fictitious, or assumed name, so that people who do business with you can find out who the actual owners of your business are. You may also want to register any such trade name, as a means of protecting against other companies usurping that particular trade name. In Connecticut, you need to register an assumed business name with the town clerk in the town where your business is to be conducted. There is a small filing fee, which varies from town to town. To reserve a corporate name, contact the Connecticut Secretary of State's office. V. EMPLOYER REQUIREMENTS IF YOU HAVE EMPLOYEES (a) Employer Registration and Withholding. If you have any employees, you will already be withholding federal income tax and FICA taxes from their wages. In addition, since Connecticut imposes a state income tax on the income of individuals, you will need to also withhold Connecticut income tax from the wages of your employees. Before you begin to pay wages, you must register as an employer with the Department of Revenue Services on Form REG-1, which also serves as your registration for most other state taxes. Request a copy of Connecticut Circular CT, Employer's Tax Guide and Withholding Tables. Employers whose state income tax withholding for the year ended June 30, 2004 was more than $10,000 are required to file payroll tax returns and pay such withholding tax electronically, beginning in January, 2005. One such filing and payment option is to use the Department of Revenue Services' Internet filing system, Fast-File, on the DRS website. Employers withholding state income tax must remit the taxes on a weekly, monthly, or quarterly basis, depending upon the amount of wage withholding in the 12-month "look-back period." For more information on Connecticut income tax withholding and registration requirements for employers, see the contact information for the offices of the Department of Revenue Services, listed in Section VI(a). (b) Unemployment and Other State Payroll Taxes. If your business employs one or more individuals in each of 20 weeks during any calendar year or if your payroll amounts to $1,500 in any calendar quarter in either the current or the preceding calendar year, you, as an employer will be required to pay state unemployment tax based on the amount of such wages paid. Employers subject to the Connecticut unemployment tax are required to register with the Employer Status Unit of the Connecticut Department of Labor on Form UC-1A. New employers are required to pay tax at a rate of 2.9% in 2000 on the first $15,000 of wages paid to each employee. After you have had employees for a while, you will develop an unemployment tax experience rating. This rating is based on the number of employees you terminate who then claim unemployment benefits and the amount of such benefits paid to those former employees, under complex formulas. The state will inform you when they have assigned you an individual tax rate based on your firm's experience rating. That rate may be higher or, if you have had relatively few benefit claims charged to your account, lower than the standard new employer tax rate you initially were paying. All state unemployment taxes are imposed upon you as the employer, and, under Connecticut law, cannot be charged to your employees or withheld from their wages. For more information on your Connecticut unemployment tax obligations as an employer, see the contact information for the Employer Status Unit - Employment Security Division, of the Connecticut Department of Labor, listed in Section VI(a). (c) Workers' Compensation. Workers' compensation insurance is a state-mandated insurance requirement for most employers, in almost every state. In Connecticut, virtually all businesses with one or more employees are required by law to have workers' compensation insurance, except those able to self-insure. Note, however, that a sole proprietor or a partner in a partnership is generally not considered an employee. Workers' compensation provides wage loss and medical benefits to employees injured on the job and it protects you, as an employer, from legal action for damages for injuries or job-related illnesses suffered by your employees. In effect, it is a "no-fault" insurance system for work-related injuries or illnesses. Thus, if you fail to obtain required workers' compensation insurance, and an employee is injured on the job, you will have opened yourself to unlimited liability and severe legal consequences, so it is very important to obtain workers' compensation insurance for your employees. Be aware that neither general liability nor health and accident insurance can properly substitute for workers' compensation insurance. For more detailed information regarding your obligations as an employer under the Connecticut workers' compensation laws, contact your insurance carrier or see the contact information for the offices of the Workers' Compensation Commission, listed in Section VI(a). (d) State Wage and Hour Laws. Some employees of certain small firms not engaged in interstate commerce are not covered by the federal minimum wage and overtime laws. However, even if few or none of your employees are covered by the federal wage-hour laws, because your firm does less than $500,000 a year in gross sales and the employees in question are not deemed to "...engage in (interstate) commerce...," they will still generally be subject to the Connecticut wage-hour laws, which provide for a state minimum hourly wage will increase to keep up with increases in the federal minimum wage, so that the Connecticut minimum wage always remains at least 0.5% above the federal. The state minimum wage is currently one of the highest in the country, at $7.10 per hour. Connecticut requires payment of time-and-a-half for any overtime hours worked each week, in excess of 40 hours a week. Besides the federal wage-hour posters that you must display in the workplace, you must also display a state wage-hour poster, which you can obtain from the Connecticut Department of Labor. In addition to wage-hour laws, most businesses are subject to federal child labor laws, which put numerous restrictions on the working hours and kinds of work in which minors under the age of 18 may engage. Your business must also be cognizant of similar state child labor laws, in Connecticut. (e) State Occupational Safety and Health Laws. Approximately half of the states have their own OSHA-like agency, charged with administering the state's own occupational safety and health laws. The remaining states have no such enforcement agency, and thus rely instead on the federal Occupational Safety and Health Administration (OSHA) to administer the federal job safety rules within such states. Connecticut is one of the states that has its own OSHA-type agency, CONN-OSHA, but it only has jurisdiction over state and local government employees, deferring to the federal OSHA agency to enforce job safety laws in the private sector. For information on your job safety and health obligations as an employer required posters, and free safety consultation services provided by the state OSHA division, see the contact information for the Connecticut Department of Labor, listed in Section VI(a). (f) Other Miscellaneous State Labor Laws. Other Connecticut labor laws you need to be aware of, as an employer, include the following: (1) Wage payments to terminated employees. Connecticut law requires that an employee who quits employment be paid any wages that are owed to him or her no later than the next regular payday. However, you must pay an employee whom you discharge no later than the next business day after the termination. Otherwise, wages must generally be paid weekly, unless the employer obtains permission from the Labor Commissioner to pay wages less frequently. (2) Right-to-work laws. About half the states have enacted "right-to-work" laws, which guarantee that no person may be denied employment for refusing to join a union or for not paying union dues, thus banning either "union shop" or "agency shop" agreements, or both. In a union shop, an employee not belonging to a union may be hired but then must join the union, usually within 30 days. In an agency shop, an employee need not join the union but, to remain employed, must pay union dues. Connecticut does not have such a right-to-work law and allows union shop or agency shop contracts between an employer and a union. (3) State anti-discrimination laws. In addition to complying with federal anti-discrimination laws, employers must also be aware of and comply with state civil rights laws in Connecticut, and display a poster informing employees of their rights. You can obtain this poster from the Connecticut Department of Labor, at the address listed in Section VI(a). Connecticut's anti-discrimination and civil rights laws include laws regarding equal pay, regardless of gender, and fair employment laws, generally similar to the federal fair employment laws, also covering marital status, sexual orientation, medical condition, and mental or physical disability. (4) Reporting new hires. Under new federal welfare reform laws, employers in all states now have to report newly-hired (or rehired) employees to a designated state agency (the Connecticut Department of Labor for Connecticut employers) within 20 days after the date of hire. A copy of the Form CT-W4 that must be completed for state income tax withholding for every new employee may be faxed or otherwise submitted to satisfy the new hire reporting requirement. VI. STATE SOURCES OF HELP AND INFORMATION (a) Key State Agencies Contact Information. Connecticut, as many states have done in recent years, has set up a Smart Start "one-stop" center to help your new or existing businesses to obtain all necessary state licenses and permits from a single office, without your having to go from agency to agency to meet all the legal and regulatory licensing requirements. BUSINESS STARTUP INFORMATION. To obtain business registration forms and information on starting or relocating your business in Connecticut, contact:
SECRETARY OF STATE. Contact this office for information on:
STATE LICENSING. For assistance and information on all state licensing and permit requirements, contact the Connecticut Department of Economic and Community Development, at the address listed above for that agency. Also see the website (listed in Section VI(c)) for the Connecticut Licensing Information Center (CLIC), which provides extensive licensing information online. STATE UNEMPLOYMENT TAX. Contact the following state agency to determine whether you are an employer subject to payment of state unemployment taxes, and for registration as an employer if you are subject. Also request their booklet, Employer's Guide -- Unemployment Compensation.
STATE ANTI-DISCRIMINATION AGENCY. For information on state civil rights laws in Connecticut, contact the following commission:
(b) Small Business Development Centers. A number of Small Business Development Centers (SBDCs) are located throughout Connecticut to assist you. These centers, usually located on college campuses, provide a wealth of start-up information and sponsor frequent business-oriented seminars. Contact the lead office below for information, or for the location of other SBDCs nearer to you.
(c) Internet Sites. If you have access to the Internet, there is a wealth of state and even local business information provided by state and local governments. All states now have a state government Web page, and most major state agencies also have sites on the Internet where you can obtain useful small business information on matters such as state taxes, financing sources, or the addresses and phone numbers (or e-mail addresses) of various state and federal agencies' offices in Connecticut. Since new sites are appearing constantly, you might also want to search for other Connecticut government Web sites by using one of the popular Internet search engines, such as Excite! or Yahoo. You may want to begin with the following Internet sites: State of Connecticut Home Page: Connecticut Department of Revenue Services (where you can download state tax forms and business registration forms): Secretary of the State (incorporation, formation of limited partnerships, LLPs, and LLCs): Connecticut Department of Labor: Connecticut Department of Economic and Community Development (which operates one-stop Smart Start center to help you with all state licenses and permits): Connecticut Licensing Information Center (CLIC -- provides online information on state licenses and permits of all types): Connecticut Small Business Development Center, University of Connecticut:(d) Financing Sources. For information and help on locating financing for your small business, contact the nearest U.S. Small Business Administration office in Connecticut, or contact the following state agency regarding state loan programs for small businesses:
|
Copyright © 2000 Michael D. Jenkins
|