- Before starting a business in Colorado, you must familiarize yourself with the state's business laws and regulations.
- You must register your business with the Colorado Secretary of State. This includes filing the necessary paperwork and paying the applicable fees.
- Depending on the type of business you are starting, you may need to obtain special licenses and permits from local, county, and state government agencies.
- You must file for business taxes with the Colorado Department of Revenue. This includes obtaining an Employer Identification Number (EIN) and registering for the applicable taxes.
The business environment in Colorado is favorable to businesses in the country, especially Colorado. According to SBA, in 2018, the state had about 611,495 small businesses. The 611,495 small businesses form about 99.5% of the total businesses in Colorado, so more than the majority of businesses in Colorado are small; a substantially large part of the working class is a part of small businesses.
U.S. News and World Report placed Colorado in 4th position in the ranking of the most favorable business environments in the U.S. in 2019. Minimal Corporate tax and a substantially high GDP make the state a favorable place to initiate one's business.
Right from licenses to permits, there are several essential things you need to keep in mind to start your business in Colorado. Our guide will help you determine the right way to start a business.
Steps To Start A Business
The necessary steps required to start a business in Colorado are:
Select The Type For Your Entity
One can register their entity under three types: DBA, Corporation, or LLC.
- Colorado LLC: This is the most preferred option among people. LLC is a distinct entity. It has become more popular, leaving behind DBA and corporations due to its features, such as liability protection coupled with fewer complications than a corporation.
- Colorado Corporation: This is also a distinct entity and enables liability protection to founders. It is an entity that includes shareholders, the board of directors, and administrators. It is more complicated than a DBA, although it is the preferred choice for huge companies and startups who want to raise funds. Certain professions are given the option of Professional Corporation or PC, and the professions referred to here include doctors, lawyers, and architects.
- DBA: The main motive behind DBA is being able to differentiate between business and personal matters with the help of a business name. If one has a registered DBA or corporation, they can use the help of a DBA to initiate a new division to prevent them from starting a new company. However, there is no provision in DBA for liability protection. Even though one forms a DBA, it is advised to form an LLC or Corporation for different tax and liability benefits.
Choosing A Suitable Name For The Business
A suitable name for the business is one of the most essential tasks for an entrepreneur starting a company. To prevent expensive name changes in due course, it is better to choose an original and available name not trademarked by anyone else.
A business name should be catchy, attractive, and easy to remember and pronounce. When starting one product or service, one should be sure to keep in mind the future additions one can make and choose the name appropriately. Shortlisted names can be tested on family and friends by saying them out loud.
One should consider the names of a customer. Is it justified in describing one's product or service? Is it catchy and easy to remember, and would it help the business's growth? Putting effort into choosing a suitable name for your business will save a huge amount of money and the hassle that one has to endure to change the name of the business.
Remember to search the internet for your shortlisted names to prevent future conflicts. Quick searches on well-known search engines like google or binge will come in handy to see if some other business is using the name. There are cases where a well-known company still needs to trademark its name.
To be certain that your proposed name is not taken, one can facilitate the Colorado Business Entity Database and explore the State of Colorado site to check one's name.
Also, keep in mind to check different spellings of your company's name to avoid any conflict. Colorado's government will only accept the name if it matches any other companies' names or is too close enough. One can look at the state's naming guidelines to know how to name one's company.
For example, when registering an LLC, one must include a Limited Liability Company or LLC in the name.
Registration Of One's Business
To register an LLC in Colorado, one has to file their LLC Articles of Organization. One has also to get access to the services of a registered agent and hold meetings of the firm to manage the board, form agreements, and record contributions.
Then there is a waiting period of around 2-3 business days in case of online registration and 3-5 days for e-mail registration taken up by the Colorado Secretary of State. A registered agent is necessary in the case of each LLC and corporation. Also, you must have a permanent address in the state. A registered agent is necessary because it helps you in different ways, like time savings and hassle-free registration.
In the case of a DBA, one can check their shortlisted name on the website of YOUR COUNTY recorder to check for their desired name. Then one can ask for forms and file them offline or online; the forms are submitted to your county.
One Must Have A Registered Federal Tax ID
When forming an LLC or Corporation, the IRS mandates all the companies to have a tax ID, also known as Employer Identification Number EIN. DBA is required to have EIN only on the condition that it is hiring employees; if it does not, then they have to mention its social security number on all outside legal documents, including tax filings. Although DBAs don't need an EIN, it is advised to have an EIN since it protects one from identity theft. One can apply for it online, by fax, or by email.
Applying For Credit And Creating A Businesses Bank Account
It is a basic rule that when one operates a business, one has to open a business bank account to segregate between expenses of personal life and that of the company. Thus, one has to operate a separate business account. Also, to build a credit score for the business, it is advised to have a credit card separately. Since running a business only with cash is not feasible, one has to get credit from outside.
The best bank to open a business account is to have a business bank. Some well-known business banks in the state are Bank of Colorado, Chase, U.S. Bank, and Colorado Business Bank.
Create Accounting And Filing Systems
As a business in the state, one is obligated to file tax and annual reports. Thus, a system is essential to keep the finances and paperwork in order and thus helps in becoming hassle-free for the administration.
If one is managing their accounts by themselves, then there are many tools for accounting that are low cost or even free, which can help them process invoices and track expenses. On the other hand, if one can afford professionals for accounting, they can facilitate their services.
Companies are mandated to maintain documents for at least three years. Like owners' information and addresses, a copy of each formation document, yearly progress reports, and company and board changes. In addition, every filing of taxes is mandated to be kept for a minimum of seven years from the last filing date and should be easy to access at any point in time, so one can set up a paper filing cabinet to manage their papers.
Selecting And Hiring Employees
If one is considering hiring qualified employees for their small businesses, they can facilitate help from the Colorado Department of Labor and Employment. Thus, one can use information, tools, and recruiter services to manage themselves as an employer.
Getting Insurance For The Business
In the case of businesses, one has to get insurance to get protection from theft or unpredictable accidents. Generally, two different types of business policy are General Business Insurance and Business Owner Policy. Insurance for the business is very important, and the cost it has to bear is worth it, keeping in mind the protection it offers.
Systemization Of Business Processes
Operating a business is a challenging task. Thus, one should not make it more difficult and systemize and automate the process. Like when new directors and administrators of the company are hired, the automated process helps them in making the working of the business smooth and does create any delays. In addition, business automation can be applied in aspects like processing orders and bill payments.
Creating A Business Logo And Formulating A Marketing Plan
There needs to be more than just setting up a company to make one's business successful; one also has to formulate a marketing plan, logo, and website. In creating a marketing plan, one has to research the target audience for the sale of their goods and services.
Reappearing Requirements Of The Business
In the case of a DBA, the fictitious business name has a validity of only five years and has to be renewed periodically.
In the case of an LLC, the firm has to file a yearly report to the Colorado Secretary of State with tax filings. In addition, periodic reports must be filed within the last of the second month following the LLC's anniversary. Also, the renewal of licenses and permits is required.
In the case of a Corporation, the firm also has to file a yearly report and maintain business licenses and permits.
Choosing The Right Location
When starting a business in a state, you will also have to figure out the best location to benefit you. For example, McDonald's choose its locations wisely to establish its franchise since location plays a major role in people dropping in and buying burgers. Choose a location that will be great for your niche based on the product or service you are indulged in. A few businesses, like restaurants, need to consider foot traffic. More people coming in help them become successful.
All such points should be outlined in your business plan to help in the long run. Seek professional advice if required to make an informed choice.
After going through the comprehensive guide on starting a business, you know that starting a business takes work. A lot goes into starting a business, and each step needs careful consideration. First, you must ensure that you are properly forming your business entity. Obtaining the EIN and opening a bank account are a few steps that you should take. To clear your doubts, you can contact an expert or seek help from the Small Business Association (SBA). They will help you comply with state and federal laws while operating your business in Colorado.
Frequently Asked Questions
Is Colorado a good choice of state to start your business?
No doubt, the economic factors of Colorado favor all businesses, so the choice of the state is a great one. Moreover, starting a business and running it smoothly in Colorado is relatively cheap compared to the other states mentioned by the National Federation Of Independent Business.
What is the cost of starting a business in Colorado?
Starting an LLC or Corporation in Colorado requires a minimal investment of $50. Furthermore, the cost incurred varies based on the business type you plan to start. The total cost, however, depends on the permits and licenses you obtain for your business. It also includes the operational cost of running the daily operations of businesses.
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