This is worth it if: You're doing business in CT anyway (you'll owe CT taxes regardless of where you incorporate). Avoid foreign qualification costs ($250) by incorporating here.
🔑 Key Concept: S-Corp is a Tax Election, Not an Entity Type
You form a Connecticut corporation under state law, then elect S-corporation tax treatment with the IRS using Form 2553. The entity is still a Connecticut stock corporation; "S-corp" only changes federal/state taxation.
C-Corporation (Default)
A C-corporation is taxed under Subchapter C of the Internal Revenue Code. This is the default status when you incorporate.
Taxation
Federal: 21% flat corporate tax on net income
Connecticut: 7.5% corporation tax on net income (for corps with $100M+ income, rate increases)
Double taxation: Corporation pays tax, then shareholders pay tax on dividends
An S-corporation elects pass-through taxation under Subchapter S by filing IRS Form 2553.
Taxation
Federal: No corporate tax; profits pass through to shareholders' personal returns
Connecticut: S-corps pay 7.35% entity-level tax (not full pass-through like federally)
Avoid double taxation: Income taxed once (at shareholder level federally; entity + shareholder level in CT)
Self-employment tax savings: Owners can split income between salary (FICA subject) and distributions (not FICA subject)
S-Corp Eligibility Requirements
100 shareholders or fewer
Only U.S. citizens/residents as shareholders (no foreign owners)
One class of stock (voting/non-voting OK; different distribution rights NOT OK)
Not a financial institution, insurance company, or DISC
✅ When to Choose S-Corp
Profitable small/medium business (want to avoid double taxation)
Save on self-employment tax (FICA)
All owners are U.S. individuals
No plans to raise VC funding or go public
Side-by-Side Comparison
Factor
C-Corporation
S-Corporation
Federal Tax
21% corporate + dividend tax
Pass-through (taxed at shareholder level)
CT Tax
7.5% on net income
7.35% entity-level tax
Self-Employment Tax
N/A (salaries subject to FICA)
Salary subject to FICA; distributions NOT
Ownership Limits
Unlimited shareholders, any type
Max 100, U.S. individuals only
Share Classes
Multiple classes allowed
One class only
VC Funding
✅ Required
❌ VCs won't invest
Best For
Startups, VC-backed, IPO plans, complex cap tables
Profitable small businesses, family-owned, professional practices
Connecticut Professional Corporations (PCs)
A Professional Corporation (PC) is a corporation organized under Conn. Gen. Stat. § 33-182 et seq. to provide professional services requiring a state license.
Eligible Professions
Connecticut allows the following licensed professionals to form PCs:
Attorneys (lawyers)
Physicians & surgeons
Dentists
Chiropractors
Podiatrists
Optometrists
Psychologists
Veterinarians
Certified Public Accountants (CPAs)
Licensed Professional Engineers
Architects
Land Surveyors
PC Requirements
All shareholders must be licensed in the profession the PC practices
All officers/directors must be shareholders (thus, also licensed)
Corporate name must include: "Professional Corporation", "P.C.", "Professional Association", or "P.A."
State board approval: Some professions require pre-approval from licensing board before formation
Formation Fee & Annual Costs
Item
Cost
Certificate of Incorporation (PC)
$250
Annual Report
$150/year
Business Entity Tax
$250/year minimum
PC vs PLLC
Factor
Professional Corporation
Professional LLC
Formation Cost
$250
$120
Annual Cost
$400 ($150 + $250 tax)
$330 ($80 + $250 tax)
Default Tax
C-corp (double tax)
Pass-through (partnership)
Governance
Formal (board, bylaws, meetings)
Flexible (operating agreement)
Best For
Multi-owner firms, equity comp, S-corp election
Solo practitioners, small groups, simplicity
Connecticut Benefit Corporations
A Benefit Corporation is a for-profit corporation that elects benefit status under Conn. Gen. Stat. § 33-1350 et seq. to pursue general public benefit alongside profit.
Key Features
Dual purpose: Create shareholder value AND general public benefit
Connecticut corporations pay 7.5% tax on net income sourced to Connecticut.
Business Entity Tax ($250 minimum)
All Connecticut corporations owe Business Entity Tax:
Minimum: $250/year
For larger corps: 0.31% of gross income from CT sources (if over threshold)
Total Annual Tax & Filing Burden
Annual Report$150
Business Entity Tax (minimum)$250
Corporation Tax (on profits)7.5% of net income
Minimum Annual Cost (profitable corps):$400 + 7.5% of profit
Beneficial Ownership Information (BOI) Applicability
Connecticut corporations formed in the United States are exempt from FinCEN BOI reporting under current rules.
When BOI Reporting May Apply
Certain entities formed under foreign law and registered to do business in Connecticut may be reporting companies under the current FinCEN rule.
U.S.-formed corporations do not file BOI reports.
Certain foreign-formed entities registered to do business in Connecticut may still have BOI reporting obligations.
Filing Deadline
U.S.-formed corporations: exempt from BOI reporting.
Foreign-formed entities registered to do business in Connecticut: BOI reporting may apply unless an exemption applies.
New foreign reporting companies: initial BOI reports are generally due within 30 calendar days after registration becomes effective.
If BOI reporting applies, file through FinCEN's BOI E-Filing System.
Connecticut Corporation Formation Services
As an attorney licensed in California and Washington, I handle Connecticut formations with AI-assisted tools and remain responsible for the work; filings follow Connecticut's procedures. I offer comprehensive corporation formation and ongoing legal support.
⚖️ How I work
For an accepted engagement:
I am admitted in California and Washington. I communicate with clients by email within the agreed scope.
I prepare client documents using AI-assisted tools, review the work before delivery, and remain responsible for its content.
C-corp vs S-corp tax analysis and election assistance