Starting Business In Colorado:
Small businesses account for more than 99% of new businesses in Colorado. The state continues to be a top-tier location in terms of talent, business climate, and business infrastructure. This is fantastic news for anyone looking to start a small business in Colorado. Before you do, read our guide, which will help you identify the critical steps you must take to properly establish a business in the state.
Before Learning How to Start a Business in Colorado,
It is critical to plan your business. The first step is to create a business plan that explains your business concept, marketing your products or services, and how you intend to fund the venture.
Consider a business plan to be a document to which you add details or make changes as your company evolves. It can be used to help you stay on track and make wise business decisions, as well as to help you obtain funding from a bank or investor.
Pick Your Entity
Choosing an entity is a critical step in starting a business. Before you begin, you must decide which of the following business entities you wish to establish:
- Limited liability limited partnership (LLLP)
- Limited liability partnership (LLP)
- Limited partnership (LP)
- Limited liability company (LLC)
- Sole proprietorship
A sole proprietorship is the simplest business entity to establish and requires no formal paperwork. However, it uses your personal tax identification number as the business number and holds you personally liable for all business liabilities. The most liability protection is provided by LLCs and corporations, but you must register with the state and pay a fee.
Register Your Business
To become a legal business entity in Colorado, any entity other than a sole proprietorship or partnership must register with the Colorado Secretary of State. When you register, you will be asked to conduct a name search to ensure that the business name is unique and does not infringe on the name of another company. Then, depending on the type of business entity you choose, you’ll file the necessary forms.
Filing for a corporation or LLC costs $50. To complete the forms, go to the Secretary of State’s website and select the desired entity. Before filing for the entity, you will go through a digital interview with questions about your business.
Prepare Your Finances
It is critical to properly organize your finances. It will assist you in keeping personal and business finances separate, resulting in greater liability protection for your personal assets. Before you can open a bank account for most business entities, you must obtain an Employer Identification Number (EIN) from the IRS website. This free tax identification number will be used to open bank accounts, unemployment insurance accounts, and tax accounts. It’s the foundation of your company’s financial structure.
Your business plan should detail your cash flow for when you launch the company and when you expect to be profitable. Obtaining financing may be a priority if you require additional capital to maintain operations while you establish yourself.
Financing could come from a small business loan from a local bank or from investors investing in the company. If you are looking for funding, your business plan will be critical in attracting or securing funding. Make certain that it is up to date and professional.
Select Your Location
McDonald’s is well-known for being a real estate firm as well as a hamburger franchise. The reason for this is that McDonald’s carefully selects locations for franchise development because the location has an impact on people coming in and purchasing burgers. Your company is no exception. Consider the best location for your company.
Some businesses, such as restaurants, require foot traffic to be successful. Other businesses may be fine with you using your home as a base while you visit prospects and customers at their locations. Your business plan should include all of this information.
When leasing a space, you should have the contract reviewed by a business attorney who can advise you on the lease’s terms and conditions. Commercial leases have a lot of clauses, some of which could put you financially on the hook for something like maintenance when you expect the management company to handle it. Get sound advice to make an informed decision.
Purchase Licenses and Permits
Despite the fact that no general business license or permit is required in Colorado, you should check with local business development offices about any special licenses and permits you may require. If you plan on doing retail sales, you must obtain a sales tax license, which costs $12 or less (depending on the date you apply) plus a $50 deposit. If you are a professional service provider, you may need to obtain certain state licenses in order to legally offer your services in the state. This is common in the medical field, and fees vary greatly depending on the license.
When starting a business, don’t forget about insurance. It is not always necessary, but consider the liability and the cost of a claim. Many new businesses fail because they are unable to absorb unexpected losses if they do not have insurance.
You may be required to obtain insurance at times. When you lease a property, for example, the lease terms will almost certainly require you to obtain liability insurance. If you have one or more employees, you will also need workers’ compensation insurance.
As you can see, there is a lot to do when starting a Colorado business. Take your time going through each step to ensure that you have properly formed your business entity, obtained an EIN, and opened bank accounts for the company. When in doubt, seek the advice of a legal expert or a Small Business Association (SBA) adviser to ensure that you are in compliance with state and federal laws.