Colorado Business Registration Benefits
Limit

Limit Liability

Enhance

Enhance Privacy

Professional

Professional

  • Our $149 Service Includes:
  • Registered Agent Service
  • Operating Agreement
  • 24 Hour Turn Around
  • Business Address
  • All State Fees
  • No Surprises
  • & More

Colorado Business Registration
Benefits

Structuring Your Small Business

Your passion may be painting houses, building houses or walking dogs. Eventually, the question becomes whether you should operate as a sole proprietor or register a business in Colorado. This page is meant to help answer that question. We provide guides designed to make operating your Colorado company easy. We cover the differences between forming a Colorado LLC, Sole-Proprietorship and Corporations.


After choosing an entity, learn how to obtain your Employer Identification Number (EIN), file your periodic report, set up a virtual office, open a bank account, what a registered agent is, how get a free phone number and more. Keep scrolling to learn more.

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Asset Protection

Protect your
home, savings and lifestyle.

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Low Fees

We charge $149 the first year. In future years our agent service is $49.

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New Tax Laws

Save more on taxes
than you spend on formation.

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Simplicity

Everything
is done
the same day.

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Private Ownership

Colorado does not require owners be listed. Use our name instead.

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Professionalism

Increases trust compared to a Sole-Proprietorship.

Colorado LLC Benefits

A sole proprietorship is when the person is the business. They are owned by one person and have no legal requirements to start. Many starting out opt for this default structure. They require no extra paperwork, but they pay more in taxes and offer no asset protection.

Sole-Proprietorship Negatives

A sole proprietorship is when the person is the business. They are owned by one person and have no legal requirements to start. Many starting out opt for this default structure. They require no extra paperwork, but they pay more in taxes and offer no asset protection.

Unlimited Liability: A proprietorship has unlimited liability and the owner is responsible for all debt. You as the owner are also liable for all the debts of the business, if someone sues the business, they are suing you. The owner can be forced to sell personal belongings to pay down debts. This is known as unlimited liability and is a major downfall in being a proprietorship.


Higher Taxes: A sole prop pays the same taxes as a wage earner. This means no taking advantage of the new tax code for small businesses and paying too much in earned income taxes.


Not Professional: Doing business in your personal name is less professional. Clients and vendors know you have not registered with the state, that you cannot have any partners and can only grow so large. Having a business shows you're there for the long term and this is more than a side project.


Discloses Private Info: Forming an LLC allows you anonymity. Colorado's Secretary does not list owners or managers. Contrast this to a sole-prop where your name appears everywhere and people know your home address. Learn more about LLC privacy here.


Rather than spending a lot on insurance, and hoping to not be sued, you may form an LLC or a Corporation for additional protection. Each has better tax treatment which more than cover the minimal cost of incorporating with us.

LLC vs Corporations

Formal corporate structures, such as LLCs and Corporations, have some very attractive points and are similar in several ways. They exist as their own entities and are their own individuals in the eyes of the law.


Similarities


  • Both LLCs and Corporations conduct business with the rights and responsibilities of a person. They are legally separate from their owners, and therefore responsible for their own debts.
  • This separation is what provides personal protection from company liabilities. Both entities protect owners from the negligent acts of other owners. Neither proprietorships nor partnerships offer this.
  • Since a company is its own entity, its life span is not linked to any person and so it can live forever. This is what it means for an entity to be of perpetual duration.

Differences


  • Corporations may find it easier to raise capital. Multiple share classes offer greater versatility which investors tend to favor. The downside is corporations pay more in taxes and have greater burdens when it comes to corporate governance.
  • Corporations are subject to double taxation which means that both the corporation's income is taxed and the income given to its owners through dividends is taxed as part of the owner's personal income. The only exception to double taxation is an S Corporation where owners report their shares as part of their personal income.
  • Corporations have more rigid operating structures and titles. For example, Corporations must have a President and a Board of Directors. Usually, the managers are not the owners in a corporation.
  • Most companies are now limited liability companies which offer the benefits of a corporation because of limited liability and the tax benefits of both partnerships and proprietorships.

Q1: What is Your Risk Tolerance?

Which business structure you should select is impacted by the amount of personal risk you want to be exposed to. When you are in a sole proprietorship or a partnership, then your personal assets can be put at risk if your company is sued. For this reason alone, we advise clients to consider forming limited liability companies and corporations. This process helps to segregate professional assets from personal assets during legal actions.


Q2: What does the owner agreement look like?

If there are multiple owners then you need an agreement. For LLCs this is called an operating agreement and for Corporations these are called the bylaws.


There are simple forms of each where every owner is treated equally. However, in some situations you may want more complex arrangements. For example, perhaps you wish for silent partners who only contribute money, but cannot make decisions or sign on the company’s behalf. In such a case an LLC is a good fit.


On the other hand, perhaps you want multiple classes of ownership. Some of whom have no voting rights, others who receive a guaranteed return before others, and another who does not share in profits until the fifth year. In this case, a Corporation is generally a better fit. Their bylaws and articles allow for much more complex arrangements. However, with such complexity comes additional cost. Leading us to our next question…


Q3: What are you willing to pay?

The final factor is the amount of money available for the structuring process. Individuals that have a limited budget often opt for an LLC. They provide asset protection and tax benefits along with some flexibility. Those that have money set aside, or more complex needs, can invest in a Corporation.


Which is Better?

A corporation will be preferred in situations where a complex shareholder agreement is required. Otherwise, a limited liability company lowers costs and reduces corporate formalities. Unless you have received specific legal or accounting advice otherwise, it is generally preferable to form an llc.


Why Use Us?

From A to incorporated, we will file everything correctly the first time. We will put our information into the public record rather than yours. We also have a number of resource articles on getting a free business phone, opening a bank account, obtaining your EIN, along with registering foreign corporations and LLC.

Colorado LLC Checklist

When conducting business in Colorado, there are number of rules and regulations to pay attention to. These requirements come at the local, state, and federal level and must be followed in order to avoid penalty and maintain good standing with the state. Here, we’ve provided a checklist of things to consider when starting your business in Colorado. Due to the variety of business-types and industries, this list is not comprehensive. However, it should serve as a good starting point for most businesses.

Starting Your Colorado Business

The following is an overview of the steps you will take to start your business in Colorado:

  1. Choose a name and conduct a search to ensure availability.
  2. Select the appropriate business entity designation.
  3. Register with the Colorado Secretary of State.
  4. Obtain an Employer Identification Number.
  5. Open a bank account for your business.
  6. Register with the Colorado Department of Revenue.
  7. Obtain all necessary permits or licenses.

Choosing a Business Name

While it may seem simple in theory, choosing a business name should be given considerable thought and planning. Ideally, you will choose a name that is memorable and easy to associate with your given industry, service, or product. Additionally, pick a name that gives a positive impression and conveys an appropriate image of your company.

Once you have chosen a name for your business, or narrowed down your list of options, check to make sure the name is available for use. To do this, search the name on the Secretary of State webpage, which contains a database of all registered Colorado businesses. At this time, you may want to search available domain names, as well. Even if it is not an immediate requirement for your business, it may prove useful down the road.

Choose a Business Entity Type

The next important step in your business formation is deciding which type of entity best fits your business. The different entity options are sole proprietorship, partnership, limited liability company, or corporation. Sole proprietorships are one-person businesses. If you operate a sole-proprietorship there is not a legal distinction between your business assets and your personal assets. Partnerships are treated the same as sole proprietorships. The only distinction is that a partnership operates with two or more individuals. Limited liability companies, or LLCs, are recognized as legally separate entities, though are taxed as a sole proprietorship with pass-through taxation. Corporations are entirely separate legal entities often formed to run larger businesses. This legal structure offers limited liability protection to its shareholders.

Register with the CO Secretary of State

In order to properly register your business in the state of Colorado, you must file articles of incorporation or organization with the Secretary of State. To file your articles, visit the Secretary of State webpage here: http://www.sos.state.co.us/biz/FileDoc.do. The filing fee and official registration form varies between business entity type:

  • Sole Proprietorship: $20, Statement of Trade Name of an Individual
  • Partnership: $25, Statement of Trade Name of an Individual
  • LLC: $50, Articles of Organization
  • Corporation: $50, Articles of Incorporation

Obtain an EIN

Next, you should obtain an Employer Identification Number, also known as a Federal Tax ID Number. This is a unique number the IRS assigns to your business for tax purposes. It is sometimes referred to a social security number for your business. Additionally, your EIN can be used to file taxes and open a bank account, among other things. The best option for obtaining your EIN is completing an online application with the IRS at irs.gov.

Open a Business Bank Account

It is important to open a separate bank account for your business for a number of reasons. Among them is the need to separate your business assets from your personal assets for both legal considerations and good accounting practices. Once you have opened an account, your bank can provide you with debit and credit cards.

Register with the CO Department of Revenue

Once you have formed your business, it is important that you also register with the Department of Revenue. If you are registering as a sole proprietorship, partnership, or LLC, you will need to file the Colorado Form 104. If you are registering as a corporation, then you will need to file the Colorado Form 112. Calculating taxes for your business can be a complex process. Any mistakes can lead to penalties and negative marks against your business. If you want to ensure this process is handled correctly, enlist the services of an expert accountant.

Permits & Licenses

Depending on the nature of your business, additional permits or licenses may be required. Once you have registered your business with the Colorado Secretary of State and obtained an EIN from the IRS, check into which permits and licenses apply to your business. Two good resources for this information are The Division of Professions and Occupations and the Colorado Small Business Navigator.

Our Colorado LLC Formation Service

If you would like assistance with forming your Colorado LLC, consider using our LLC formation service. Our expert guidance can ensure that your LLC complies with all Colorado state requirements, while also protecting your personal information.