Brette Sember is a former attorney who has been writing and editing law and legal topics for over 25 years. She is the author of over 40 of her books and is nationally recognized as a divorce and family law expert, with extensive experience including estates, probate, finance, business, bankruptcy, and more . Her website is www.BretteSember.com.
Brette Sember is a former attorney who has been writing and editing law and legal topics for over 25 years. She is the author of over 40 of her books and is nationally recognized as a divorce and family law expert, with extensive experience including estates, probate, finance, business, bankruptcy, and more . Her website is www.BretteSember.com.
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Over 99% of new businesses in Colorado are small businesses. The state remains a top-ranked location in terms of talent, business environment and business infrastructure. This is all great news for anyone looking to start a small business in Colorado. Before you do, read our guide that will help you identify the important things you need to do to properly establish your business in the state.
Before you learn how to start a business in Colorado
Planning your business is essential. The first step is to write out a business plan that describes your business idea, how you will market your products or services, and how you will finance your business.
Think of your business plan as a document that you add details to and adjust as you make changes to your company. It serves as a tool to help you stay on track with your plans and make smart business decisions, and can also help you obtain funding through banks and investors.
Please select an entity
Choosing a business entity is an important step in establishing your business. Before you do anything, you need to decide which of the following business entities you want to form:
A sole proprietorship is the easiest business entity to set up and requires no formal paperwork. However, because the individual's tax ID number is used as the business number, all responsibility for the business falls on the individual. LLCs and corporations offer the highest liability protection, but they must be registered with the state and pay fees.
register your company
For business entities other than sole proprietorships or partnerships, you must register your company with the Colorado Secretary of State to become a legal business entity in Colorado. When registering, you will be asked to perform a name search to ensure your business name is unique and does not infringe on another company's name. Next, submit the required forms depending on the type of entity you choose.
There is a $50 fee for corporations or LLCs to apply. You can fill out the form by visiting the Secretary of State's website and selecting the desired entity. Before applying for a legal entity, you will undergo a digital interview that includes questions about your business.
Set up finances
It's important to set up your finances properly. It helps separate your personal and business finances, giving you greater liability protection for your personal assets. Most businesses require you to obtain an Employer Identification Number (EIN) from the IRS website before you can set up a bank account. Use this free tax identification number to open a bank account, unemployment insurance account, or tax account. It is the basis of your business's financial structure.
funding
Your business plan should outline your cash flows when you start your business and when you expect it to be profitable. If additional capital is needed to sustain the business during company formation, financing may be a priority. Financing may come from small business loans from local banks or by asking investors to invest in your business. When seeking financing, a business plan is an important element in obtaining and securing financing. Make sure it's up to date and professional.
Please select a location
McDonald's is widely known as a hamburger franchise as well as a real estate company. The reason is that McDonald's carefully chooses the locations in which it builds its franchises because those locations influence the number of people who come to the store and buy their burgers. Your business is no exception. Think about the best location for your business.
Some businesses, such as restaurants, need foot traffic to be successful. Other companies may be able to do just fine based at home while you go out and meet with prospects and customers on-site. All of this should be outlined in your business plan.
When leasing space, it's a good idea to have your contract reviewed by a business attorney who can advise you on the terms of the lease. Commercial leases tend to have a lot of clauses, some of which can leave you financially strapped for costs such as maintenance that you expect the management company to cover. Get the right advice and make an educated decision.
Obtain licenses and permits
Although general business licenses and permits are not required in Colorado, we recommend checking with your local business development office to learn about any special licenses or permits that may be required. If you are selling retail, you must obtain a sales tax license for less than $12 (depending on application date) plus a $50 deposit. If you are a professional service provider, you may need a specific state license to legally provide services within your state. This is common in medical services, and fees vary widely depending on license.
sign up for insurance
Don't forget about insurance when starting a business. Although it's not always necessary, consider your liability and what a claim could cost you. Without insurance, many new businesses fail because they cannot absorb unexpected losses.
In some cases, we may ask you to take out insurance. For example, if you lease real estate, the terms of your lease may require you to carry liability insurance. Additionally, if you have one or more employees, you must enroll in workers' compensation insurance.
conclusion
As you can see, there are many things you need to do to start a business in Colorado. Take your time and complete each step to ensure you have properly formed your business entity, obtained an EIN, and established a company bank account. When in doubt, consult a legal professional or a Small Business Association (SBA) advisor to help you comply with state and federal laws.
Frequently asked questions (FAQ)
Is Colorado good for small businesses?
According to the National Federation of Independent Business (NFIB), Colorado is a favorable state for starting a business from an economic standpoint, but starting and operating a business in Colorado is more expensive than in many other states.
How much does it cost to start a business in Colorado?
It costs as little as $50 to form an LLC or corporation in Colorado, but the costs to start a business vary. The total cost depends on the required permits and licenses, as well as the operational costs of running your company's day-to-day operations.
Does an LLC need a business license in Colorado?
Although Colorado does not require all businesses to be licensed at the state level, many types of businesses require a license from a city or county. Legal entities such as LLCs require appropriate business licenses depending on the type of business they conduct. An LLC is not a business license.
How are LLCs taxed in Colorado?
When you form an LLC, you choose whether to be taxed as a corporation or to pass the taxes on to your personal tax return.
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