You’re about to embark on a long and exciting journey, one full of hard work and rewards: starting a new business. With wide eyes and big dreams, you’re about to enter the world of business ownership.
But beyond the initial thrill of the startup decision, there’s a lot to consider. In fact, if you’ve never done it before, starting a business can seem like an intimidating mountain of work. Out of all your responsibilities and tasks, you might not even know where to start.
But have no fear. The good news is that once you have everything planned out and understand the process, the formation process is smooth sailing. And this is your go-to guide.
Everything you’ve been wondering about, everything you need to do, every question you have – it’s all right here. By the time you’re through these 16 steps, you’ll be a bonafide business owner who’s prepared for sustained success.
1) Write a Business Plan
Jumping into this endeavor without goals, directives, or a sense of direction can lead to a scattered, unproductive business.
A business plan lays the groundwork for your future success. It helps you analyze key elements of your business and forge pathways to achieve your goals. Here are a few things you should consider including in your business plan:
- Executive Summary (a separate document that gives a complete overview of your business’ purpose, plans, goals, competition, opportunities, etc.)
- Company description
- Market Analysis (opportunities, competition, etc.)
- Managerial or organizational structure
- Products and/or services
- Marketing strategies
- Funding goals
- Financial projections
Business plans aren’t just great for internal operations, but they give your business legitimacy in front of potential investors, customers, partners, and more. Need help? Check out this guide from the U.S. Small Business Administration.
2) Decide on a Business Name
You might’ve come up with the perfect name right away. If so, consider yourself lucky. Sometimes, deciding on a business can be difficult, requiring brainstorming meetings and late-night rap sessions. That’s because your name is your business’ identity and reputation. It should be something that’s unique and memorable but also defines your business purpose.
Your business structure will dictate some of your name’s specific characteristics. For example, if you go with an LLC, your name will need to contain some form or abbreviation of the words “limited liability company” or “LLC.” See the Secretary of State’s Business FAQ page for additional restrictions.
But even if you follow all the appropriate requirements, you can’t use it if it’s already taken by someone else. Once you’ve settled on a name, perform a name availability search through the Secretary of State website to see if it’s free. If so, go ahead and claim it by filing a name reservation or including it on your Articles of Organization.
3) Decide on a Legal Structure
There are only a few types of business structures, but each one dictates some important parts of how your business will run.
The most popular types are the sole proprietorship, general partnership, limited liability company (LLC), S corporation, and C corporation. Most small businesses go with the LLC because of its unique blend of flexibility and personal asset protection.
However, you shouldn’t make this decision without reading up on all of your options. We’ve done plenty of research on each business type and developed side-by-side comparisons. Check out our LLC vs. Corporation and LLC vs. Sole Proprietorship comparison guides for a closer look.
4) Choose a Registered Agent
The Secretary of State needs a point of contact for your business, someone who will be available at your registered office address during typical business hours – 9am to 5pm.
This person is called a registered agent, and they serve as an intermediary with the state, receiving all of your company’s important legal communications and relaying them on to you. The Colorado registered agent ensures that no important state documents, deadlines, or payments fall through the cracks, so you’ll want to choose a person or company you trust.
You can choose either an individual or a business entity as your registered agent in Colorado, but they must:
- Be an individual Colorado resident or a business entity authorized to do business in the state.
- Have a physical address in Colorado.
- Have a mailing address in Colorado (not a P.O. box).
Unlike most states, Colorado will allow an LLC to serve as its own registered agent, which is a convenient option for this step. If you’re set on appointing an individual, it’s often wise to choose someone who knows the details of operating a business, like an attorney or consultant. However, owners, employees, family members, and friends are also valid options.
Or, you can choose a registered agent service instead. These companies take care of all your registered agent responsibilities, and some will even handle your business formation and annual reporting as well.
Important: You must continuously maintain a registered agent on file with the Secretary of State. If your agent resigns or you appoint a new one, you’ll need to notify them by filing the appropriate documents.
5) Register Your Business
This is the big one, the step that officially creates your business. No matter which business type you choose, you’ll need to register it with the Secretary of State.
LLCs: To kickstart your LLC formation process, you’ll need to file a form called the Articles of Organization. All Articles of Organization forms must be filed online, but you can find a hard copy sample here.
This Colorado LLC filing costs $50. Head over to the Secretary of State’s Business Forms page and you’ll find it under “Limited Liability Companies.” Just click “File Online,” and follow the onscreen instructions. Your form will be processed immediately.
Corporations: Similar to LLCs, there’s one form that will get the ball rolling on your formation process, but instead of the Articles of Organization, it’s called the Articles of Incorporation, also available online.
Sole Proprietorship/General Partnership: There are no official forms or fees to register as a sole proprietor or general partnership. Simply start doing business and that’s it! While this is obviously faster and easier, we recommend incorporating your business because of the personal asset protection LLCs and corporations provide.
Foreign Entities: Let’s say you already have a business, but it’s in another state and you’re bringing it to Colorado. In this case, you would need to foreign qualify it by filing a Statement of Foreign Entity Authority. All out-of-state businesses must foreign qualify before transacting business in Colorado, or they can face serious fines and consequences.
6) Get an EIN
The Employer Identification Number (EIN) is your ticket to doing state and federal taxes. It’s a nine-digit number, much like a Social Security Number, that identifies your business on tax documents.
If you’re forming an LLC, it will be considered a “pass-through” entity, so the business itself won’t pay federal income taxes. Instead, you and the other members will report income and losses on your personal tax returns.
But this doesn’t mean you can go without an EIN. If your LLC pays any type of business taxes – like Sales, Use, or Unemployment Taxes – or hires employees, you’ll need to get one.
Unsure if you need one? The IRS provides a useful “Do I need an EIN?” link on this page, where you can also apply for an EIN. If you go through the online application process, you’ll receive your number immediately.
Otherwise, you can submit a Form SS-4 by fax to (855) 641-6935 or by mail to :
Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999
7) Open a Business Bank Account
LLC and corporation owners are required to keep their personal and business finances completely separate, or they risk losing their personal asset protection. To do so, you’ll need a business bank account.
The good news is that opening a business bank account is pretty simple. Just pay a visit to your bank’s local branch and sit down with one of the bankers there. You will need to present your formation documents, an EIN number, and some personal information. Then, you can direct all of your business income and expenses to that account instead of a personal one.
It doesn’t really matter which bank you choose, whether it’s a national giant like Chase or Bank of America or a small, local bank. However, it’s usually easiest to go with the one where you have existing accounts.
8) Handle Any Tax Obligations
Ah, taxes. They’re always part of the picture, especially when you run a business.
Familiarizing yourself with your business’ tax requirements will help you establish a solid financial plan going forward. LLCs don’t need to file a corporate tax return and pay federal income taxes, so you’ll handle these taxes as part of your personal return.
Corporations, on the other hand, will need to file a Corporate Income Tax Return, while sole proprietorships/general partnerships will need to pay self-employment taxes.
There are a few other taxes your business may owe in Colorado, depending on your circumstances:
Sales and Use Taxes: Does your company sell any kid of merchandise? If so, it will owe Sales and Use Taxes. You can register for this tax through the Department of Revenue (online or with a paper copy).
Withholding and Unemployment Taxes: Do you have any employees? Your business will need to pay a Withholding Tax through the Department of Revenue and Unemployment Insurance Taxes through the Department of Labor and Employment.
Visit Colorado’s Department of Revenue website for additional tax information.
9) Find an Accountant
Sometimes it’s easier to hand off your financial responsibilities to a professional. Not only will an accountant ensures that your taxes are filed and paid correctly, but they might also find a few ways to save your business money.
Bookkeeping and tax procedures are time-consuming and require some specialized knowledge. Balance sheets, financial reports, cash flow, audits, and much more – an accountant can ensure that your company operates smoothly and streamlines its expenses.
This can be expensive depending on the complexity of your finances, but the benefits an accountant offers can be well worth it.
10) Create an Operating Agreement
An operating agreement constructs a framework of procedures and standards for your business. This is where you can lay out processes for member conduct, asset allocation, compensation policies, voting procedures, dissolution, and much more.
While operating agreements aren’t technically required in Colorado, they are essential to your business’ stability and success. They provide a safety net in legal disputes and legitimacy in front of banks, courts, government agencies, and other businesses.
You can either draft one yourself using an online template, or you can hire an attorney or an incorporation service to take care of it for you.
Once you’ve drafted your agreement, it must be approved by each of your LLC’s members, then filed with the rest of your business documents. You do not need to submit it to the Secretary of State.
11) Acquire the Necessary Licenses
After filing your formation documents, your business is legitimate, but it might still need specific licenses before opening its doors in Colorado. This depends on your business type and activities, so you should review the requirements for each license just to make sure.
Professional/Occupational Licenses: Certain professions and business purposes require licensure from state boards before they can start operating in Colorado. For example, accounting firms must obtain a license from the state’s Board of Accountancy and barbers from the Office of Barber and Cosmetology Licensure. Check this page on the Department of Regulatory Agencies website to see a complete list of licensed occupations.
Local Licenses: Your specific city, county, or municipality might have its own licensure requirements. Take a look at your local government’s website to find out.
12) Consider Business Insurance
Even though it’s not pleasant to consider, there’s always a chance that unforeseen events might take a toll on your assets.
While forming an LLC or corporation offers some personal asset protection, additional business insurance can also protect your business assets in cases of lawsuits, damages, etc. You can acquire insurance for your business products, vehicles, specific occupations and much more.
If you hire employees, you’ll also need to get workers’ compensation insurance. SBA.gov has a useful guide for determining which forms of insurance your new business might need.
13) Build a Website
Your company’s digital presence is just as important as its physical one. Like it or not, most potential customers will find your business online, and if you don’t exist online, you’re missing out.
But don’t worry, you don’t need to be an HTML or web design expert to build a website. Sites like WordPress and Squarespace make it easy to construct an elegant and responsive website, no coding necessary. But if you’re not comfortable or confident doing it on your own, you can always hire a professional web designer to take care of it for you.
14) Launch Social Media Accounts
Making your mark on the digital landscape doesn’t start and end with your website. Most successful businesses also have a robust social media presence on multiple platforms. Facebook, Twitter, and Instagram are all great ways to connect organically with potential customers and develop your brand voice.
Just don’t forget to publish consistent social media content, or you’ll have trouble building a base of followers.
15) Understand Ongoing Colorado Requirements
After you’ve launched your business, things will likely be moving at 100 miles per hour as you evolve and grow. But in all of the excitement, you can’t forget your state’s ongoing compliance requirements. Every state has its own annual or biennial business requirements.
To keep the state updated on your business’ recent changes and updated information, you’ll need to submit a Periodic Report and pay the requisite $10 filing fee by the end of its “anniversary month,” or the month in which it was formed. If you don’t file the report by two months after the due date, you will be changed a $50 late fee and your business will be deemed “noncompliant.” Let it go for two more months, and “noncompliant” will turn into “delinquent,” which can eventually lead to administrative dissolution.
16) Check Out Colorado Small Business Resources
You’re not on this journey alone. There are plenty of free resources available to make starting and growing your business a smoother, easier process.
If you’re seeking assistance or support in the formation process, a great starting point is SBA.gov, which has an entire publication dedicated to Colorado small business resources, including consulting services, loan opportunities, networking events, and much more. Take a look at the Colorado SBA district office webpage for more information.