What Constitutes Doing Business in Connecticut?

An out-of-state, or foreign, business entity must register with the state before it can legally operate within its borders. This requirement is triggered when a company’s activities rise to the level of “transacting business,” a threshold defined by state law. The determination of whether a business is transacting in the state is based on its specific activities. Failing to comply can lead to penalties and restrict a company’s access to state courts, and these requirements apply to various business structures, including corporations, limited liability companies (LLCs), and limited partnerships.

Activities Establishing a Business Presence

A foreign entity must obtain a Certificate of Authority from the Connecticut Secretary of State when it is considered to be “transacting business” within the state. Certain activities are clear indicators of a business presence, such as maintaining an office, warehouse, or other place of business. The employment of individuals within Connecticut is another factor that can trigger the registration requirement. Owning or leasing real property in the state is also considered transacting business, as is engaging in contracts or maintaining a stock of goods for sale and delivery.

Connecticut law outlines specific “safe harbor” activities that do not constitute transacting business for registration purposes. A company can perform the following actions without needing a Certificate of Authority:

• Maintain a bank account in the state.
• Hold meetings of its board of directors or shareholders or conduct other activities related to its internal corporate affairs.
• Secure or collect debts, or enforce mortgages and security interests on property within the state.
• Solicit or obtain orders, provided those orders require acceptance outside of Connecticut before they become binding contracts.
• Conduct an isolated transaction that is completed within thirty days and is not part of a recurring pattern of similar transactions.

Triggers for Connecticut Tax Obligations

A company’s responsibility to pay taxes in Connecticut is determined by “nexus,” a connection to the state substantial enough to warrant taxation. This threshold can be met even if a company’s activities do not rise to the level of “transacting business” for corporate registration. A business may have a tax obligation without being required to obtain a Certificate of Authority. The Connecticut Department of Revenue Services (DRS) establishes these nexus standards, which vary by tax type.

For sales and use tax, Connecticut has an economic nexus standard for remote sellers. A business must register with the DRS and collect sales tax if, during the preceding 12-month period, it had both gross receipts of $100,000 or more from sales into the state and made 200 or more separate retail sales into the state. Meeting both of these criteria creates a sales tax collection responsibility, even if the business has no physical presence in Connecticut.

Nexus for the Corporation Business Tax is established if a company carries on business or has the right to carry on business in the state. This includes deriving income from sources within Connecticut or having a substantial economic presence. For pass-through entities (PEs), such as S corporations and partnerships, the obligation to file a PE Tax return is triggered when the entity has income derived from or connected with sources within Connecticut.

Information Required for State Registration

Before registering, a business must gather several pieces of information and documentation. The company’s legal name must be distinguishable from other businesses on file with the Connecticut Secretary of State. If the name is not available, a fictitious name may be adopted for use in the state.

Other required items include:

• A federal Employer Identification Number (EIN).
• The North American Industry Classification System (NAICS) code for the primary business activity.
• The addresses of the company’s principal office and the names and addresses of its officers or directors.
• A registered agent with a physical street address in Connecticut for receiving legal documents; a P.O. box is not acceptable.
• A Certificate of Good Standing from the company’s home state, issued within the last 90 days.

The Registration Process

For corporate registration, the Application for Certificate of Authority is submitted to the Commercial Recording Division of the Secretary of the State. This can be done electronically through the state’s online business portal or by mail. The application must be submitted with the Certificate of Good Standing and the required payment; businesses should confirm the current filing fee on the Secretary of the State’s website.

After registering with the Secretary of the State, the business must also register with the Department of Revenue Services for tax purposes. This is done through myconneCT, the state’s online system for managing tax accounts. The business will use this portal to register for specific taxes it is required to pay, such as sales tax or the Corporation Business Tax.

Upon completion of both registration processes, the business will receive official confirmation from the state. The Secretary of the State will return a stamped copy of the filed document, which serves as the Certificate of Authority. The Department of Revenue Services will issue a Connecticut Tax Registration Number, which must be used on all state tax filings. This number finalizes the company’s tax registration and allows it to begin collecting and remitting taxes as required.