As the economic recovery begins to take shape, a significant number of new businesses will be started in Colorado. Some of these businesses will be started by experienced entrepreneurs while others will be started by “first timers” eager for a career change or an opportunity to pursue a new challenge. Regardless of your level of experience, the following checklist can serve as a guide to starting your business:
- Choose a Business Structure. In Colorado, the most common entities for new businesses are the sole proprietorship, general partnership, limited partnership, limited liability company; and corporation. When considering which structure is right for your new business you should consider the following factors: (i) the extent owners are protected from personal liability; (ii) your desired management structure; (iii) the ease or difficulty of formation; and (iv) relevant tax consequences. Click here for a comparison of the alternative structures.
- Obtain an Employer Identification Number (EIN). An Employer Identification Number is a number issued by the Internal Revenue Service used to identify business entities for federal tax purposes. Think of it as a social security number for your business. EINs are used by sole proprietors (in certain circumstances), corporations, partnerships, trusts, limited liability companies, and other business entities. You can refer to the following Internal Revenue Service publication “Understanding Your EIN” for information regarding whether an EIN will be needed for your prospective business venture.
- Register for State and Local Taxes. If your business will be collecting sales tax or have employees, you must complete and submit a Form CR0100 “Colorado Business Registration” to the Colorado Department of Revenue. This Form will serve to open your sales tax license, state wage withholding and unemployment insurance accounts. The form was also previously used to register business trade names, however such registration is now done through the Colorado Secretary of State’s Office. You can download the form at www.taxcolorado.com. You should also check with the relevant city and county governmental agencies regarding applicable local taxes including sales taxes and personal property taxes.
- Protect Your Intellectual Property. Any new business owner should take precautionary steps to protect their company’s intellectual property. The most common forms of intellectual property include trademarks, trade names, and patents. A trademark is word, name, or symbol used to identify your company’s goods and/or services. Trademarks can be registered in Colorado with the Colorado Secretary of State’s Office and federally with the United States Patent and Trademark Office. Such registrations are effective for 10 years assuming certain conditions are met. A trade name is a name, other than the legal name of the business, under which the business is authorized to transact business. Businesses and individuals transacting business in the State of Colorado under a name that is not their legal name are required to file a trade name with the Colorado Secretary of State’s Office. A patent is a property right for an invention granted by the federal government. Patents are issued by the United States Patent and Trademark Office and are valid for 20 years.
- Obtain Necessary Licenses and Permits. Depending on the nature of your business enterprise special licenses or permits may be required. The Colorado Department of Regulatory Agencies provides a list of business and occupations that require additional state licenses or permits. Federal and local jurisdictions may also impose additional licensure and permitting requirements.
- Familiarize Yourself with Employment Considerations. Your business will likely depend on individuals to perform services for your business. A preliminary question will be whether these individuals will be classified as employees or independent contractors. Click here for a discussion of relevant considerations and ramifications concerning the distinction. In the event your business will have employees, you will need to be familiar with a myriad of labor laws concerning such issues as minimum wage, overtime pay, breaks, payroll taxes including wage withholding, social security/Medicare taxes, unemployment insurance and forms such as the INS Form I-9, Form W-4, and Form W-2. A discussion of these issues and forms can be found in the United States Department of Labor’s “Employment Law Guide”.
New businesses in Colorado must navigate a number of legal and regulatory hurdles. However, the checklist above can serve as a starting point to making sure your business is on the right track. If you would like more information regarding your new Colorado business, please contact our Business Law Group partner, David A. Closson at [email protected].