Here’s an overview of the key steps you’ll need to take to start your own business in Colorado.
The most common legal structures for a small business are:
There also are special versions of some of these structures, such as limited partnerships and S corporations. You’ll want to consider which business entity structure offers the type of liability protection you want and the best tax, financing, and financial benefits for you and your business. Check Choose Your Business Structure on Nolo’s website for more information on how to choose the best ownership structure for your business.
For LLCs and corporations, you will need to check that your name is distinguishable from the names of other business entities already on file with the Colorado Secretary of State (SOS). You can check for available names by doing a business entity search on the SOS website. You can reserve an available name for 120 days by filing aStatement of Reservation of Name. You can also renew a previously filed reservation by filing a Statement of Renewal of Reservation of Name. There are certain name requirements for LLCs and corporations (like including a word such as “LLC” for LLCs or “Company” for corporations). See How to Form an LLC in Colorado and How to Form a Corporation in Colorado for more information.
Is your business a sole proprietorship or partnership that uses a business name that is different from the legal name of the business owner (for a sole proprietorship) or surnames of the individual partners (for a partnership)? If so, you must file a document with the SOS. For sole proprietorships, file a Statement of Trade Name of an Individual and for partnerships file a Statement of Trade Name. Forms for both of the latter filings are available from this SOS webpage.
If you plan on doing business online, you may want to register your business name as a domain name. See Choose and Register a Domain Name for more information. In addition, to avoid trademark infringement issues, you should do a federal and state trademark check to make sure the name you want to use is not the same as or too similar to a name already in use. See How to Do a Trademark Search for more information.
Tax Registration. If you will be selling goods in Colorado, you must register with the Department of Revenue (DOR) to collect sales tax. If your business will have employees, you must register with the DOR for employer withholding taxes. You can register for both types of tax online via the Colorado Business Express or on paper usingForm CR-0100.
EIN. If your business has employees or is taxed separately from you, you must obtain a federal Employer Identification Number (EIN) from the IRS. Even if you are not required to obtain an EIN, there are often business reasons for doing so. Banks often require an EIN to open an account in the business’s name and other companies you do business with may require an EIN to process payments. You can get an EIN by completing an online application on the IRS website. There is no filing fee.
Regulatory licenses and permits. These cover areas such as:
For many licenses, you can find information on the Colorado Department of Regulatory Agencies (DORA) website. In addition, check the Colorado Small Business Development Center (SBDC) Network for its Resource Book on starting a Colorado Business and the Business & Licensing page of the SOS website. For information about local licenses and permits, check the websites for any cities or counties where you will do business.
Professional and occupational licenses. These cover people who work in various fields. The DORA website includes information and links for these kinds of licenses.
You’ll need to pick a location for your business and check local zoning regulations. That includes if you work from home. You may be able to find zoning regulations for your town or city by checking municode.com.
Colorado taxes every kind of business. See Colorado State Business Income Tax for more information on state business taxes in Colorado.
Sole proprietorships. Pay state taxes on business income as part of their personal state income tax returns (Form 104).
Partnerships. Partners pay state taxes on partnership income on personal tax returns. In addition, Colorado partnerships also must file Form 106.
LLCs. Members pay state taxes on their share of LLC income on personal tax returns. In addition, LLCs themselves have to file an additional state tax form — either a partnership return or a corporation return. The specific form used will depend on how the LLC is classified for federal tax purposes. Colorado LLCs also are required to file aperiodic report (known in most other states as annual report) with the Colorado SOS. See Colorado LLC Annual Filing Requirements for more information.
Corporations. Shareholders must pay states taxes on their dividends from the corporation. A shareholder-employee with a salary also must pay state income tax on his or her personal state tax return. Moreover, the corporation itself is subject to Colorado corporation taxes. And, finally, corporations must file a periodic report(known in most other states as annual report) with the Colorado SOS.
If you have employees, you must also deal with state employer taxes.
And, apart from Colorado taxes, there are always federal income and employer taxes. Check IRS Publications 334,Tax Guide for Small Business, and 583, Taxpayers Starting a Business, available at irs.gov.
Insurance is a good idea for most kinds of business. While insurance often is regulated at the state level, the types of business insurance available are usually similar across the fifty states. Check Obtaining Business Insurance for more information.