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19755 East Pikes Peak Ave, Suite 101, Parker, CO 80138

19755 East Pikes Peak Ave, Suite 101, Parker, CO 80138

Ten Basic Steps to Starting a Business in Colorado

  1. Entity:  Select the best entity for your business by talking with your CPA and/or business attorney.
  2. Register:
    1. To obtain a trade name/doing-business-as name for a sole proprietorship or general partnership, file Form CR100 with the Colorado Dept of Revenue.  A small fee is required.
    2. To organize an LLC or a corporation (S or C—the S and C status are granted by IRS, not Colorado), file articles of organization (LLC) or incorporation with Colorado Secretary of State.
    3. To register a doing-business-as name or a trade name for a corporation or LLC, you must file with the Colorado Secretary of State, NOT Colorado Dept of Revenue.
  3. Federal Tax Identification Number:  Obtain an entity tax identification number with the Internal Revenue Service (necessary for employers; necessary to establish banking for the entity).  File Form SS-4.  Go to www.irs.gov and type SS-4 into search box.  The system will take you through a wizard and will provide a tax id number (also called EIN, FEIN – employer identification number, federal employer identification number; TIN – tax identification number).   The FEIN allows you to withhold federal taxes from employees’ paychecks and allows you to remit those withholdings and FICA/medicare match funds to the IRS.
  4. Establish bank accounts:  Sole proprietors may bank at banks or credit unions.  Generally, corporations and LLCs must bank with banks and may not use credit unions.  To set up a bank account, you will need to take a copy of your filed articles of organization/incorporation as well as your federal tax identification number.
  5. S corporation election:  If LLC to be taxed as corporation, you must file Form 8879 immediately.  If corporation intends to be taxed as S corp, you must file Form 2553 immediately, but no later than 75 days after incorporating.  Pick up forms at www.irs.gov and mail to Internal Revenue Service, Ogden UT 84201.  Sign the 2553 in three places and mail by certified mail.  This is a very important filing.  There are remedies for late filing, but better to get it done on time.
  6. Employers must set up the following accounts with Colorado.
    1. State income tax withholding –use http://www.colorado.gov/cms/forms/dor-tax/CR0100.pdf. or https://secure.cdle.state.co.us/CR100/   File Form CR100 to request withholding account number, and can be done online.  If the entity already has a Colo number for sales tax, then the entity must file a paper copy of CR100 and indicate the number that the entity uses for sales tax.
    2. State Unemployment –  use Colorado Business Express http://www.colorado.gov/cbe/ and follow the online registration.
    3. Occupational Privilege Tax – several cities in Colorado require employees and employers to pay for the privilege of working in their city limits:  Denver, Aurora, Greenwood Village, Sheridan to name a few.  Look at the web site for the city in which you are located.
  7. Workers Compensation Insurance (required by law to cover all non-owner employees.  Talk to your CPA about definition of “owner” see http://www.workerscompensationinsurance.com/workers_compensation/colorado.htm).  Contact Pinnacol Assurance www.pinnacol.com or The Hartford www.thehartford.com or your payroll administrator or your insurance broker.
  8. Business liability and/or errors & omissions insurance:  talk with your insurance company about the need to have business insurance policies.  If you are home-based, your homeowner’s insurance may NOT cover your business assets or “slip and fall” accidents of customers coming and going from your property.
  9. Sales Tax:  if you are selling goods, you will be required to collect sales tax from customers and remit to the state and possibly a local taxing authority (ie a city).  To collect state, county and RTD/cultural district sales tax, apply on Form CR100 https://secure.cdle.state.co.us/CR100/.  If you have a storefront, you will collect sales tax for the local authority and will generally need to apply to your township for a business license and a local sales tax license – see the web sites of your locality.  If you ship to various places in Colorado, you will have to collect sales tax for every location to which you ship.  This is a nightmare.  Talk to your CPA.

If you think this is all beyond complicated, you are right.  Contact your CPA for assistance.  It is critical to have everything set up correctly to avoid problems in the near future.