Entrepreneurs looking to start a business have many important decisions to make. One of the most important is choosing where to locate their business.
Colorado offers great options for business owners. With beautiful locales, reasonable tax rates, and many tax incentives, business owners will find a lot to like about locating in the Centennial State. There are many things to check off when launching a Colorado business. You’ll need to determine the business structure you use for your company, develop a business plan, get the proper licenses and permits, and create a marketing strategy.
However, once those important tasks are completed, you’ll be ready to launch and enjoy all the exciting rewards of being a small business owner. Here is a closer look at several of the key steps necessary for starting a small business in Colorado.
1. Create the Business Structure
One of the most important decisions a business owner makes is how to structure the business. The business structure has important considerations, especially regarding how the business operates, how it’s taxed, and the owners’ liability.
One of the most popular choices for Colorado business owners is to organize the business as a limited liability company (LLC). An LLC provides owners with incredible flexibility to operate the business themselves or hire a manager. An LLC also gives owners liability protection, meaning that in the case of bankruptcy or judgment against the company, creditors cannot, in most cases, come after the owner’s personal assets. That means that as an owner, your savings, home, and auto cannot be taken in adverse financial circumstances.
The LLC is known as a pass-through entity, meaning the business’ profits and losses are recorded on the owners’ individual income tax returns. The LLC structure also allows for the business itself to be taxed in multiple ways, given the owners’ financial circumstances.
Many business owners use a service that can complete the paperwork for them because applying for an LLC in Colorado can be a complex process. These services also usually act as the registered agent, meaning they collect paperwork and any legal documents on behalf of the business. In Colorado, there is a $50 charge to file as an LLC. Technically, the fee is to file the Articles of Organization with the state. The articles call for the following:
-Formal business name
-Principal office address
-Registered agent name, address, mailing address, and consent
-The business organization type. An LLC can be manager-managed, meaning the owners hire someone to oversee the
company on a day-to-day basis, or member-managed, meaning the owners are active in the decision-making process.
-Names and addresses of the people forming the LLC
-Name and address of the person filing the articles
2. Obtain Business Licenses and Permits
Unlike in other states, business owners in Colorado do not need to obtain a general business license. However, various state agencies do issue licenses for different types of regulated businesses, such as various trades, banks, and financial businesses.
The Colorado Department of Regulatory Agencies maintains an online database of the business types that are regulated, showing which agency oversees those businesses and providing links for where to apply or renew the permits and licenses.
You will need to apply for a state tax identification number, which is the corporate equivalent of a Social Security number. The tax ID is a unique identifier and will be used when filing sales taxes and other tax forms.
If you sell products or services in Colorado, you will need to collect sales tax, which is 2.9 percent. However, counties, cities, and special districts can also collect sales taxes.
If you operate a brick-and-mortar location, you may also need to apply for local building or occupancy permits or other certifications before you can operate. Your business may also be subject to various local guidelines and criteria. Checking with your local government is a smart move for any new business.
3. Create a Unique Business Name
Your name says a lot about your business and is an important way for customers to find you. Your name is everywhere, from web pages to storefront signs to business cards.
That’s why it’s important that you select a unique business name that is not already in use by another Colorado business. The Colorado Secretary of State’s office maintains an online search function that allows you to enter the name you want to use and will tell you whether it’s available. There’s also a business database that lets you search for company names, trademarks, trade names, and IDs or document numbers. This tool will provide a list of businesses that have names similar to the one you enter.
If you’re looking to trademark different parts of your business, there’s an additional online database. It allows you to specify the business class you are searching in and determine if the trademarks are actively canceled, expired, or withdrawn.
4. Develop a Business Plan
A business plan is an important document for any entrepreneur to create. The business plan is a way to spell out what the company is, its products and services, the competition, and its business strategy. Having a well-developed business plan is essential for entrepreneurs who are looking to secure financing, either from a bank, other financial
institutions, or private investors.
The core elements of your business plan include:
-Executive Summary. The introductory section includes the company’s mission statement and details about the business leadership, operations, location, and employees.
-Company Description. This section details the broad business plan for the company and its vision. It will list the business name, structure, products and services offered, and a brief overview of the target market and customers. The owners detail the company’s creation, history, and evolution in this description.
-Products and Services. In this section, the business owner dives into more detail about the products and services it offers and why they are valuable to potential customers. It will detail the pricing, competitive landscape, and differentiators for your products and services compared to your competition.
-Market Analysis. Here, the business plan details the industry and the market. How does the typical customer come to need these products and services? How easy or difficult will it be to secure market share?
-Marketing Strategy. This section illustrates how the company will pitch its products and services, which channels it will use and why, and how distribution will operate. It will also discuss how the business plans to attract and retain customers.
-Financials. This section will provide financial documents, projects, and analyses, including balance sheets, financial statements, and profit and loss statements. For newer businesses, the section may include targets and estimates for its first few years of operation.
5. Hire Advisors
Every business starts lean. However, even if your business has few or no employees, it’s important to get counsel on key elements of the operation. You may come across tricky legal matters, so having an attorney on call can help you create legal documents and templates, review agreements and partnerships, and gain advice.
An accountant (or bookkeeper for a smaller business) is important for helping to keep the finances straight. An accountant can help to create and maintain financial records, prepare monthly reports, and complete tax returns. They can also offer insights into the financial health of the organization and provide tips.
A financial advisor is an important partner for any business owner. Starting a new business can dramatically change the owner’s financial situation and a certified financial planner can help guide on investments,
savings, and other strategies. Starting a business in Colorado is an exciting venture. By following these key steps, your business will be off to a strong start.