Essential Steps for Registering Your New Business in Colorado and Navigating IRS Requirements

Starting a new business is an exhilarating experience filled with opportunities, challenges, and a lot of paperwork. If you're planning to launch your venture in the beautiful state of Colorado, it's crucial to understand how to register your new business properly and navigate the essential IRS requirements. This guide will walk you through the key steps to help ensure a smooth start.

Understanding Business Structure

Before registering your business, decide on the type of business structure that best suits your objectives. The most common structures in Colorado include:

• Sole Proprietorship: This is the simplest form and is owned by one person. It requires minimal formalities but exposes the owner to personal liability.

  
  

• Partnership: This involves two or more people who share ownership. Partners share profits and losses, and personal liability is a factor here too. You can set up a partnership as a limited liability company as well to help reduce your liability.

  
  

• Corporation: A corporation is a separate legal entity from its owners, offering liability protection but involving more complexity in terms of management and taxation.

  
  

• Limited Liability Company (LLC): An LLC combines the characteristics of a corporation and a partnership, providing liability protection while allowing profits to pass through to the owners’ personal income. You can have a single member LLC or multimember LLC.

  
  

Once you have chosen the right structure for your business, you can proceed with the registration process.

Registering Your Business Name

In Colorado, you need to select a unique business name that complies with state regulations.

1. Check Name Availability: Use the Colorado Secretary of State’s online database to check if your desired name is available. Go here: Business Organizations and select name availability search.

   
   

2. Reserve Your Name (Optional): If you want to ensure your business name isn’t taken while you prepare for launching, you can reserve it for 120 days by filing a Reservation of Name form and paying the applicable fee.

   
   

3. Register the Name: Depending on the type of business entity, you might need to register a trade name, also known as a "Doing Business As" (DBA) name. This is done through the Colorado Secretary of State’s office.

   
   

Filing Your Entity Formation Documents

Once you have your business name, the next step is to file the necessary documents to form your business entity.

• Sole Proprietorship: No formal action is necessary, but you must register your DBA name.

• Partnership: File a Partnership Statement with the state to register your partnership.

• Corporation and LLC: You’ll need to file Articles of Incorporation or Articles of Organization, respectively. This paperwork typically includes basic information about your business, such as its name, address, and structure.

  
  

Make sure to pay the required filing fee, which varies depending on the type of business entity you are forming.

To file the paperwork for a new entity, go here: File a Business Document.

1. Click on "File a form to create a NEW record"

2. Select the appropriate business type

   1. Trade name - aka Doing Business as Name

   2. Limited Liability Company (single member or multi member)

   3. Profit corporation - normal corporation (can change C corp to S corp with IRS filing paperwork)

   4. Nonprofit corporation - corporation for non-profit driven activities

   5. Reserve a name for later use - only reserves the name so that it cannot be used

   6. Various partnership entity types (note there are specific cases for each of these - ask you don't know what it is)

3. Enter your name and follow the instructions

4. Enter the address of your principal office address. It should be street address. Add a mailing address if different.

5. Enter a registered agent (probably the owner or a third party if you hired a registered agent). Address follows the same rules as #3. Street Address and mailing address if different.

6. Answer the questions on the following screens.

   1. LLC will ask about member or manager managed LLC. Member managed is the most common. Reach out if you have questions about that.

   2. Corporation will ask about number of shares. Reach out if you have questions about that.

7. Answer the questions about who is forming the entity.

8. Add additional information as needed for your business. Attach any additional information

9. Choose if the filing is immediately effective or later.

10. Enter the information about the person forming the entity.

11. Sign up for email and text notifications. I suggest you do this, that way you remember to file the annual filing each year.

12. Review and pay the fee.

    
    

Obtaining Necessary Licenses and Permits

After your business is registered, check if you require any additional licenses and permits to operate legally in Colorado.

1. Local Licenses: Many cities and counties have their own requirements, so visit your local government’s website to see what you need.

   
   

2. State Licenses: Depending on your business type, you may need specific state licenses. For example, businesses that sell alcohol or provide professional services often require additional permits.

   
   

3. Federal Licenses: Certain industries may also need federal licenses. Research if your business falls into one of these categories.

   
   

Registering for Taxes in Colorado

After securing any necessary licenses and permits, you need to register for taxes.

• Sales Tax License: If your business sells goods and services in Colorado, you’ll likely need a sales tax license. You can register online through the Colorado Department of Revenue.

  
  

• Employer Identification Number (EIN): If you plan to hire employees or operate as a corporation or partnership, you'll need an EIN from the IRS. This can be done online and is free of charge. You can do that here: https://sa.www4.irs.gov/modiein/individual/index.jsp

  
  

• State Tax Account: Depending on your business operations, you may also need to establish a Colorado state tax account for income tax withholding and other payroll taxes.

  
  

Navigating IRS Requirements

Understanding your responsibilities under federal tax law is crucial when starting your business.

1. Determine Your Tax Obligations: Depending on the business structure you choose, your tax obligations will vary. For example, LLCs enjoy the flexibility of being taxed as a sole proprietorship, partnership, or corporation (s or c corp).

   1. It is important to note that Sole Proprietors and single member LLC's (without any other election) are passed through to the owner's tax return

   2. Corporations, Partnerships, multimember LLC's, and LLC's electing to be taxed as c or s corp, must file a separate tax return with the IRS (even if the S-corporation or partnership is a passthrough entity).

      
      

2. Record-Keeping: Maintain detailed financial records, including income, expenses, and payroll records. This will help you manage your finances and prepare for tax season. You must also keep copies of your receipts, mileage logs, and other important documents.

   
   

3. Filing Schedule: Be aware of your business's filing deadlines. Businesses typically need to file federal taxes quarterly, but your specific situation may require different schedules.

   
   

4. Estimated Taxes: If you expect to owe more than $1,000 in taxes when you file your return, you’ll likely need to make estimated quarterly payments to the IRS.

   
   

Additional Resources

• Colorado Secretary of State: The official website is a valuable resource for filing forms and checking name availability.

  
  

• IRS: Visit the IRS's website for guidance on federal tax responsibilities and how to apply for an EIN.

  
  

• Local Small Business Development Centers (SBDCs): These centers provide free resources and consulting to help new business owners navigate the complexities of starting a business, including legal and financial advice.

  
  

Conclusion

Starting a new business in Colorado can be an exciting journey, but it involves various administrative tasks that require careful attention. By following the steps outlined in this guide, you can ensure that you complete the necessary registrations and navigate IRS requirements efficiently.

Planning, research, and understanding your obligations will help you lay a strong foundation for your business. Armed with this knowledge, you're now ready to take the next steps toward launching your Colorado venture!

If you need help with any of this, please reach out!

Close-up view of a business registration document on a wooden table