A small business often starts with an idea, a skill, or a dream. But moving from an idea to an actual business requires another important step: understanding and meeting your responsibilities to the State of Connecticut.

For new entrepreneurs, two of the most important connections are the Connecticut Secretary of the State and the Connecticut Department of Revenue Services (DRS). Connecting with both early can help entrepreneurs establish their businesses correctly and avoid costly compliance problems later.

The Secretary of the State is an important starting point for formally organizing a business. Depending on the business structure, entrepreneurs may need to register their business entity, confirm name availability, and obtain a Connecticut business identification number. This is also the time to determine whether additional licenses or permits are required through agencies such as the Department of Consumer Protection or Department of Public Health.

The next connection is DRS—and it should happen before you begin conducting taxable business.

DRS helps entrepreneurs understand which Connecticut taxes apply to their business, register for applicable taxes, and manage ongoing filing and payment responsibilities through myconneCT, the state's online tax portal.

This is where education becomes especially important.

Connecticut's sales tax rules vary depending on the product or service being sold. Generally, tangible goods are taxable unless specifically exempt, while services are taxable when Connecticut law specifically identifies them as taxable. There are also several different tax rates depending upon the particular product or service.

If your business is required to collect sales tax, you are essentially collecting money on behalf of the State of Connecticut. That money is not business revenue and should not be used to pay operating expenses. Maintaining collected sales taxes separately can help prevent a business owner from spending money that ultimately must be remitted to the state.

New businesses also need to understand their filing schedule. A required return may still need to be filed even when there were no taxable sales during the reporting period. Businesses purchasing taxable goods from vendors that do not collect Connecticut sales tax may also have use-tax obligations.

These are exactly the kinds of details that can create problems when entrepreneurs wait until tax season to think about compliance.

That is where SCORE Western Connecticut can become an important part of the entrepreneurial journey. SCORE provides free, confidential mentoring to help entrepreneurs think through the steps of starting and operating a business, identifying questions they should be asking and connecting with DRS, the Secretary of the State, and other appropriate professional and government resources.

A mentor does not replace your accountant, attorney, or a state agency. A mentor can, however, help you navigate the process, understand what you don't know, and find the right resource before a small issue becomes a larger problem.

Resources

Connecticut Department of Revenue Services (DRS)
Tax registration, New Business Resource Center and myconneCT
portal.ct.gov/drs
860-297-5962

Connecticut Secretary of the State / Business Services
Business formation, registration, and startup resources
business.ct.gov

SCORE Western Connecticut
Free, confidential small-business mentoring and education
score.org/ct/western-connecticut

IRS — Employer Identification Number (EIN)
irs.gov Connect early. Ask questions. Understand

Starting a business requires more than a great idea. Connect early. Ask questions. Understand your responsibilities. And build a network of resources that can help you stay compliant and grow.

Kathryn Hebert is a Certified Score Mentor, and Chair of Community Development and Engagement. She can be reached at kathryn.hebert@scorevolunteer.org.