Colorado State is a terrific place to call home for your service business, with over 653,000 small businesses and the 6th best-ranked economy in the nation. If you want to be among those who successfully run a business in Colorado, you must take the following steps to create one.
1. develop a business plan
Every successful firm begins with a thorough business strategy. Understanding launch costs, growth objectives, and your competitive landscape will help you succeed as a service business entrepreneur.
A well-crafted business plan can help you strike in.
- Determine your startup costs with the help of a well-written business plan
- Define short and long-term business goals
- Understand your competition and your own competitive edge
- Develop growth strategies
- Identify new customers
- Create a basic marketing plan
- Brainstorm additional revenue streams.
- Obtain investment.
Writing a business strategy is a simple and straightforward process. Use business plan templates from the Small Business Administration (SBA) and Colorado Business Resource Book to aid you through the process.
read more: is a business plan vital to start a business?
2. register your company in colorado
In Colorado, sole proprietorships can use the same legal name as the business owner, whereas general partnerships must include all partners’ surnames. LLCs and companies must have distinct names that adhere to Colorado’s business naming requirement.
how do you name a business in colorado?
- Determine availability.
To see if the name you desire is available or not already in use, utilize Colorado’s Name Availability Search tool and a plain old-fashioned Google search.
- Take Ownership of the Name.
If the name is available, you can register your business under it.
In Colorado, How Do You Reserve a Business Name?
In Colorado, you can reserve an organization’s name for 120 days by submitting a Statement of Reservation of Name and paying the state a $25 processing fee. If you are not quite ready to make your business official, this can be an excellent solution.
3. Check the Colorado Zoning Regulations
Zoning restrictions will impact your business regardless of where it is located in Colorado. Governments use zoning to prohibit businesses from negatively influencing residential neighborhoods, so make sure you understand the zoning at your business address. The Colorado Department of Local Affairs has information on Colorado zoning.
Local governments may impose additional restrictions if you intend to run your business from home. For example, two zone types in Denver prohibit certain sorts of home-based companies. Check with your city to see if your proposed home-based business is legal.
4. determine the best business structure for you
Every Colorado-registered firm must select a business structure. This is sometimes referred to as a “business structure,” “legal structure,” “business entity, or “legal entity.”
Your company’s legal structure will impact business creation, personal liability protection, business scale, and much more. You may learn more about legal structures by consulting with a CPA or business attorney to determine which one is ideal for you.
In Colorado, you have the following business structure options:
- Sole proprietorship
- General Partnerships
- Limited Partnerships
- Corporation
- S Corporation
- Limited liability company (LLC)
- Limited liability partnership
- Limited liability limited partnership
- Nonprofit organization
- Cooperative
- Out-of-state business
Before registering, read about each legal structure in the Colorado Business Resource Book to learn its benefits and drawbacks.
helpful resource: what are the 4 types of partnerships in business
5. register your company
You can register your Colorado business by following the steps outlined in the Colorado Secretary of State’s Checklist for New Businesses.
Here’s a rundown of what to expect:
- Choose or Appoint a State-Registered Agent.
A registered agent is a person or corporation with a physical location in Colorado who receives and distributes legal messages on your company’s behalf. The Colorado Secretary of State has further information on registered agents.
- Save Forms
Depending on your legal structure, several documents must be filed with the Colorado Secretary of State.
- Sign Up For Email Notifications.
The secretary regularly sends updates that may be relevant to your company.
- Obtain an Employer Identification Number (EIN) or a Federal Employer Identification Number (FEIN).
This is a prerequisite for federal tax registration. You can sign up with the IRS. An EIN must pay taxes, open business bank accounts, and recruit staff.
- Obtain a Colorado Sales Tax License.
A Colorado Sales Tax License may be required depending on your legal structure and the sorts of sales you intend to make. Find out more and apply at the Colorado Department of Revenue.
Filling out formation documents full of legalese is required when registering a firm in Colorado. We strongly advise all business owners to hire a business accountant or CPA to handle business registration.
What is the Cost of Registering a Business in Colorado?
For most legal structures, business registration prices in Colorado start at $50, with additional expenses based on your needs (a $20 filing charge for a trade name reservation, for example).
The Colorado Secretary of State Fee Schedule contains a complete list of business registration fees.
6. open a company bank account
It’s usually a good idea to separate your business and personal funds, no matter what type of business you’re establishing. Most firms are required by law to separate and manage their business finances in a business bank account.
It’s also a major time saver, making bookkeeping, accounting, and tax filing much more effortless.
You’ll need the EIN you created with the IRS to open your brand-new company bank account. It functions similarly to a Social Security Number for your company.
You’ll need a company checking account to manage incoming and outgoing funds. Opening a business savings account is a considerable option.
A business credit card is also an excellent strategy to improve business credit, as long as you can pay it off monthly. Choosing a bank, therefore, comes down to personal preference.
Various Financial institutions, including local, credit union, national, and neo-bank options, are available. Shop around to find the best value for your business.
7. obtain starting capital
If you have enough in your funds to start your firm immediately, you’re in good condition. If not, you’ll need to raise startup capital before you can begin working with customers.
Consider the following small business funding options in Colorado:
- Shareholders
- Loan from a friend or family member
- Bank loan for small businesses
- Business owner financing
- Government grants
- Small Business Administration loan or grant
- Angel investment
If the idea of taking out a loan does not appeal to you, consider applying for a credit card with an APR of 0% introductory interest rate.
Just be sure you can repay the money you borrowed on credit before the interest rate returns to its typical (extremely high) level, or your debt will quickly expand exponentially.
Finally, incorporate financial requirements and sources into your company strategy to keep money at the forefront of your mind throughout the beginning process.
Related: Guide to Starting a Business in Florida in 2024
8. look into licenses and permits
Depending on the type of service business you are launching, you may need to apply for federal, state, and local permissions or licenses. Permits and licenses govern businesses that provide liquor service, hair styling, acupuncture, and other services.
Check the following sites for information on the licensing requirements that relate to your business:
- Check the SBA’s licenses and permits page for federal regulations.
- The Colorado Department of Regulatory Agencies oversees licenses and permits at the state level. The same body also handles professional licensing.
- County business licenses and permits may apply to your company, so contact the county clerk in your area for additional information.
- To learn about and apply for local business licenses and permissions, contact the city hall or the local chamber of commerce. The City of Durango, for instance, handles licensing.
9. obtain commercial insurance
Every company needs insurance. Even service firms with no products to steal or damage should have insurance to safeguard the owner(s).
Your company’s legal structure, such as an LLC, may provide some security for your personal assets, but it’s always a good idea to carry extra insurance just in case. In Colorado, several businesses must have a variety of insurance policies, which number in the dozens.
Here are some examples of business insurance that you might require for your service firm:
- Workers’ Compensation Insurance.
If you intend to hire personnel, this is applicable.
- Liability Insurance.
Do you own the building where your company operates? You most likely require property insurance.
- Vehicle Insurance.
Because many service providers travel, their vehicles must be insured as part of their company.
- Liability Insurance for Professionals
You may face claims of negligence, copyright infringement, bodily injury, and other liabilities relating to your services throughout your commercial operation. Your assets might be safeguarded with professional liability insurance.
For further information, see the Colorado Department of Regulatory Agencies Small Business Guide to Insurance.
10. invest in hardware and software
Invest in a few apps and tools to keep you busy and organized before you open for business. Nowadays, most service business owners rely on business software.
helpful resource: the 14 must-have startup tools in 2024
Think about employing software to automate the following areas of your service business:
- Billing
Automate your invoicing and take credit card payments to save you and your clients time and aggravation.
- Management of Reviews
It’s not enough to hope for the best regarding your online reputation. Countick offers a review management tool to help you build a solid reputation for your company.
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- Managing Customer Relationships
You must know your consumers in order to deliver the finest service possible. A customer relationship management (CRM) platform records every encounter you have with customers so that you may provide them with precisely what they require at the exact right time.
- Planning.
If you’re a service provider or a business owner who has to schedule client appointments, you know how difficult it can be. Make scheduling easier with an automated application like Calendly or MeetFox.
Other business processes relevant to your firm may be automatable; if so, there’s a strong possibility that someone has produced a solution to assist. So, before cutting the ribbon at your big opening, don’t be afraid to do some research.
11. learn about your tax requirements
Unless you are an accountant, you should consult with a CPA to understand your company’s tax obligations, including tax rates, filing dates, and more.
Taxes must be paid at the municipal, state, and federal levels. Tax regulations can be complicated, so hiring a professional will likely save you money and time during Tax Season.
Here are some of Colorado’s most influential corporate tax obligations:
- Personal Income Tax
The majority of firms are required to pay income tax to the state in addition to federal income tax.
- The Sales Tax
You will undoubtedly be required to collect Sales & Use Tax from your customers and remit it to the Department of Revenue.
- The Withholding Tax
If you have employees, you must withhold income tax from their pay.
- The Local Tax
Many purchases are subject to an additional sales tax that some local and regional governments impose. To determine your liability, contact the revenue agency in your area.
- Sales tax.
Certain products, such as liquor or cannabis, are subject to additional taxes.
The Colorado Department of Revenue offers valuable tax guides for additional assistance.
helpful resource: business entities understanding tax implications
12. form your squad
Hiring staff can be difficult. That is why most owners choose to work with an independent contractor or two when starting a new service business.
If you need to hire somebody, ensure you have all the necessary registrations before you begin holding interviews. Federal and state standards exist for businesses with employees, and you must follow them all.
Here are some vital employer obligations to remember:
- Get an EIN
You accomplished it as part of the registration procedure in Step 5, but it bears repeating: in order to hire employees, you must have an EIN from the federal government.
- Go over the New Employer Checklist.
The Colorado Department of Labor and Employment has a comprehensive checklist that details everything you must complete before employing your first employee.
- Confirm the Employee’s Eligibility.
When you begin meeting with possible employees, you must verify their eligibility to work in the United States by having them complete this form.
In Conclusion
As you can see, there is a lot to accomplish when starting a Colorado business. Take your time going through each process to ensure that you have correctly founded your business entity, obtained an EIN, and opened bank accounts for the company.
When in doubt, seek the advice of a legal specialist or a Small Business Association (SBA) counsel to ensure you comply with state and federal regulations.
faqs (frequently asked questions)
- is colorado suitable for small businesses?
While Colorado is a favorable state regarding economic variables, the National Federation of Independent Business (NFIB) reports that it costs more to start and manage a business in the state than in many other states.
- what is the cost of starting a business in colorado?
While forming an LLC or company in Colorado might cost as little as $50, starting a business can vary greatly. The total cost depends on the required permissions and licenses as well as daily operating expenses.
- do colorado llcs need to obtain business licenses?
Many sorts of businesses require a city or county license, even if Colorado does not require all firms to obtain one on a state level. Legal entities, such as LLCs, must still get the necessary business permits based on the type of service performed. An LLC is not a business permit.
- in colorado, how is an llc taxed?
When you incorporate an LLC, you may choose whether it will be taxed as a corporation or whether the taxes will be passed through to your personal tax return.
