How to Register a Business in Colorado
It’s important to start your small business on the right foot. Colorado is a state known for its abundant natural resources and tourism opportunities. This state is also an economic hub open to businesses of all sizes.
Starting a new business is exciting and rewarding. However, there are many steps to navigate to get to the finished line. Let’s discuss how to register a business in Colorado:
Step 1: Starting Your Business: Business Concept
All successful businesses start with a good idea or a solid business concept. Regardless of the business you intend to begin in Colorado, you must identify the unique service or value that you will offer.
As a small business owner, you will be deeply involved in its operations. So, your business concept must align with your interests and skill sets. It’s challenging to start and maintain a business, so you must stay excited and motivated to achieve your goals.
Step 2: Choose a Business Name
Your business name must be unique and memorable. It should be easy to understand and pronounce and represent what your business does.
Colorado State doesn’t allow two businesses to register the same or similar names. Therefore, before you file your paperwork with the Colorado Secretary of State, you must perform a business name search to see if it’s available.
You should write down more than one business name in case your first choice is unavailable. If your business name is available, but you’re not ready to register your business, you can file a business name reservation. This reservation prevents another business from taking your business name before you file.
Step 3: Choose Your Business Structure
Structure is a prerequisite for success. If you’re already in business, you are a sole proprietor but without liability protection. If your business gets sued, you could lose your personal assets. Therefore, you should separate your business from yourself.
Here are some business structures to consider:
Limited Liability Company (LLC)
A limited liability company (LLC) provides liability protection and tax options. An LLC can have one or more owners or members but they are not responsible for the business’s debts. LLC owners also enjoy pass-through taxation.
Pass-through taxation means the LLC doesn’t file a corporate income tax return. Instead, after the LLC pays its expenses and debts, the LLC owners pay taxes on the residual revenue.
Starting an LLC requires filing documents and paying the fees with Colorado’s Secretary of State.
Corporation
A corporation gives its owners or shareholders great liability protection from lawsuits and liens. While a corporation is owned by its shareholders, it’s managed by a board of directors. The number of shareholders is unlimited.
Corporations require detailed record-keeping. Unfortunately, they must also deal with double taxation as the corporation’s profits and each shareholder’s dividends are taxed. Yet, business owners, like yourself, prefer corporations as this status helps attract investors and leverage the capital they provide for growth.
Nonprofit
A nonprofit is used for religious, charitable, educational, or scientific purposes. While nonprofit corporations don’t have shareholders, they have a board of directors. If you want to give back to society, you can start a nonprofit by filing the Nonprofit Articles of Incorporation and paying the fees to the Colorado Secretary of State.
DBA (Doing Business As)
A DBA (doing business as) is the same as a trade name. You can use a DBA to avoid using your name as you operate a sole proprietorship. A DBA is also helpful when you enter new markets or rebrand as it allows you to change your business name without amending your formation documents.
You can register a DBA by filing a Statement of Trade Name and paying the fees to the Colorado Secretary of State.
Other Considerations
After choosing your business type, you should hold your first meeting of directors, shareholders, or managers. During this meeting, you should elect new or additional directors, appoint officers, and adopt bylaws.
You should also determine which officers will be allowed to sign checks. Also, if you decide to sell shares, document the buy-sell agreements between shareholders.
Step 4: Draft a Business Plan
If you fail to plan, you plan to fail. So, you must create a detailed business plan. It will help to document your business goals, strategies, and financial projections.
A business plan is your guide to profitability and sustainable growth. It’s a blueprint that outlines the details of your business in advance to navigate future challenges and achieve strategic goals.
Components of a Business Plan
Your business plan should include:
- Executive Summary: A concise overview of your business plan, emphasizing core elements like your business concept, mission, and financial projections.
- Company Description: Include details about your business, including its vision, mission, values, and legal structure.
- Market Analysis: You must research and analyze your target market, including its size, trends, and customer demographics.
- Organizational Structure: Ensure you describe your company’s management team, key personnel, and organizational hierarchy.
- Products or Services: Include a detailed description of the goods or services you will offer. You must emphasize their unique selling points and competitive advantages.
- Marketing Strategy: You should outline how your business will reach its target market, including advertising, promotion, distribution, and sales strategies.
- Financial Projections: Your business plan must include detailed financial forecasts, such as revenue, expenses, profitability, and funding requests if applicable.
- Appendix: This final portion should contain supporting documents, data, and information that supports your business plan.
Other Requirements
After creating your business plan, you should create a budget and determine what working capital you need. You will also need an accountant to manage your business books. Ensure that you have all of your federal, state, and local tax information and forms to match your business type.
Step 5: Fund Your Startup Costs
Deciding how to fund your new business is critical. Some funding sources include:
Bootstrapping
You can use your personal savings to fund your business startup costs. Also, you would reinvest your early profits into your business. Self-funding ensures you have complete control and ownership and it’s perfect if you have low start-up costs. The disadvantage is that you will experience additional financial strain in the beginning.
Family and Friends
Family members and friends are an accessible and cost-effective way to fund your business, reducing the interest paid. But you must get the repayment terms in writing before taking any loans. Also, don’t take out more than you can pay off within a reasonable timeframe.
External Investment
You can consider venture capitalists and entrepreneurs as a capital source. However, you will likely need to give them a percentage ownership in your business. In this instance, it is best to consider creating a corporation.
Small Business Loans
Some financial institutions will give you a small business loan to get you started. You must repay this loan with interest so calculate these costs in your business plan. You may also need to share your business plan with the financial institution as part of your application process.
Loans from Energize Colorado
Energize Colorado understands the unique challenges of small business owners. We offer loans at competitive interest rates and don’t just focus on credit scores. We evaluate your business value proposition and potential. Our streamlined loan application process and flexible terms make financing readily available.
Not sure how to apply? Discover how to apply for a loan at Energize Colorado.
Step 6: Register a Business Name in Colorado
You will register your business with the Colorado Secretary of State. You can submit your paperwork online and via mail. Colorado processes business registrations in two to three business days if you file online. But, if you file via mail, it can take up to 20 business days.
Registration differs according to the business structure, and you must prepare similar details for your business, which include:
- Business purpose, ownership details, and address.
- Preferred business name and a few alternatives.
- Registered agent information or the name and address of the person who will be the Colorado Secretary of State’s contact for all your business matters. Please note that this person must be located in Colorado.
More on the Registered Agent Requirement
All LLCs and corporations doing business in Colorado must have a Colorado-registered agent. Registered agents must have a Colorado street address, maintain regular business hours, and accept all legal documents on behalf of your LLC or corporation.
You and your registered agent should also subscribe to email notifications about your new business. The Colorado Secretary of State will send all your reminders via email, so you must keep active email addresses on their file. Maintaining your record at the Secretary of State Office will help you avoid delinquency and more filing fees.
Step 7: Get Your Colorado Business License
Colorado State requires all businesses to file for a business tax certificate or a general business license. Cities and municipalities issue these business licenses and they have different requirements. If you intend to operate across multiple cities, you must apply for a business license in each location.
Know Your Regulatory Environment
Apart from the general business license, you may need to file for additional permits with the state or county. Depending on your business and industry type, you may need to account for local zoning regulations. Some businesses require food permits and liquor licenses.
You may need further licenses if you will be operating a state-regulated entity. A state-regulated entity is a business, organization, or individual operating in Colorado and is subject to the rules, laws, and oversight of state governance. They often operate in areas such as finance, healthcare, and education. If you’re a state-regulated entity, you must register with the Department of Regulatory Agencies.
You should learn about the state and city regulations that apply to your business. A good starting point is to check with your city offices. They will have the resources and personnel to help you learn more about the specific permits you will need for your business operations.
Step 8: Get an EIN For Your Business
You may need to file an Employer Identification Number (EIN) to be able to open a bank account. The EIN is also called a Federal Tax ID. It is a nine-digit number issued by the IRS and it uniquely identifies your business for tax purposes.
The EIN is like a Social Security Number (SSN) for your business, but the EIN is not as sensitive. It is vital to wait until your business structure is approved by the Colorado Secretary of State before you apply for an EIN.
Step 9: Create a Bank Account
Mixing your personal and business finances can blur the line of separation between yourself and your business. Doing so puts your personal assets (home, vehicles, and high-value assets) at risk if someone sues your business.
It is important to separate your personal finances from those of your business. This will help you maintain the liability protections you gain from registering your business. Setting up a business bank account will help you in this regard. Plus, if you maintain separate bank accounts it helps a lot with easy record-keeping and accurate tax-related documents and filing.
Step 10: Get Insurance
Insurance is essential for your business. Some categories of insurance coverage include:
- Liability: Protects you financially if you’re held responsible for someone else’s injuries or property damage.
- Workers’ compensation insurance: Provides medical care and wage replacement to your employees who get injured or sick on the job.
- Fire and premises: Offers financial protection against damages or losses to your property caused by fire, lightning, and other related perils like explosions or riots. It also safeguards you from the financial effect of property damage or destruction.
- Auto: Provides financial protection against the risks of owning and operating your vehicle. It covers potential injuries and damages from accidents or other incidents.
- Glass: This plan covers the cost of repairing or replacing broken glass in your home, business, or vehicle. You can purchase it as a standalone policy or an add-on to other insurance policies.
- Business interruption: This is also known as business income insurance. It protects your business from financial losses arising from temporary inability to operate (such as after a storm or fire) by covering missed income and ongoing expenses.
- Crime: This policy is also known as commercial crime insurance or fidelity insurance. It protects your business from financial losses arising from employee dishonesty, fraud, theft, forgery, computer crime, and more.
- Directors and officers (D&O) insurance: Protects corporate directors’ and officers’ personal assets, and their spouses, in the event they are personally sued. It safeguards from lawsuits brought by employees, customers, vendors, competitors, investors or other parties, for alleged or actual wrongful acts in managing a company.
- Product liability: This coverage protects your business from claims arising from injuries or damages caused by your products. It covers costs like legal fees and compensation for the injured parties.
How to Register a Business in Colorado: FAQs
Registering a Business in Colorado
We’ve discussed how to register a business in Colorado. If you need financing to launch your business, then consider Energize Colorado. We provide lending, resources, and advice to small businesses across the state. Our goal is to strengthen businesses and that means yours! Let’s work together to help you overcome the hurdles and achieve your strategic goals.