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 penalties and maintain good standing with the state. Here are the requirements 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.
The following is an overview of the steps you will take to start your business in Colorado:
- Choose a name and conduct a search to ensure availability.
- Select the appropriate business entity designation.
- Register with the Colorado Secretary of State.
- Obtain an Employer Identification Number.
- Open a bank account for your business.
- Register with the Colorado Department of Revenue.
- 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.
LLC vs. Corporation
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.
Registering the Business in Colorado
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. Articles are filed with the Secretary of State. The filing fee and official registration form varies between business entity types:
- 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.
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.
There are dozens of templates for operating agreements on the internet. We also provide a customized, simple operating agreement to our clients at absolutely no cost to you. Feel free to use it as needed to clearly lay out the rules for your LLC. If you need a more complex agreement, you can contact our attorneys to customize a document for you through the contact link on our website.
Open a 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.
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.
Registering a Colorado Business
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.