Colorado is home to major corporations and some of the largest companies in the United States. One of the reasons to incorporate in Colorado includes the business-friendly environment and the ease of starting a corporation.
The following step-by-step guide will show you how to start a corporation in Colorado.
1. Select a name for your corporation
One of the first steps in getting a corporation up and running is deciding on a business name. However, the business name must comply with corporation naming requirements in the state of Colorado.
General corporate name guidelines
The following Colorado corporation naming guidelines must be adhered to when deciding on a business name:
- Your Colorado corporation name cannot include words that may mislead or confuse your business with a government agency like the Treasury, FBI or State Department, etc.
- Your Colorado corporation name must not contain any terms that would violate Colorado state law; for example, do not include obscenities or references to illegal activities
- Your Colorado corporation name must be significantly different from any other existing business in the state
- Additionally, your Colorado business name must contain the following abbreviations or terms: Company, Corporation, Inc., Corp., Limited, Inc., LTD, CO.
For additional guidance when deciding on a business name for your Colorado corporation, refer to the Colorado state statute.
Additionally, it is recommended that you check the availability of your Colorado corporation name on the Colorado Secretary of State Business Search Portal. This will show you whether another business in the state has already claimed the name or whether it is still available.
Once you’ve checked the availability of your Colorado corporation name and secured it, you also have the option of applying for a trademark. While this does come with some additional costs, it does provide nationwide brand protection for your company.
Basically, it means that you have legal precedent on your side if any other business tries to conduct business with the same or a similar name.
If you wish to trademark your Colorado corporation name, simply go through to the US Patent and Trade Office or USPTO and complete the trademark registration process.
Your Colorado corporation’s entity name is the legal name under which the business is registered. Therefore, the state of Colorado identifies your business using this name, and it’s also the legal name that must be included in all of your business formation documents.
DBA (Doing-business-as) name
If you’d like to conduct business under any other name aside from your legal corporation name, then you need to register for a DBA. A DBA is a (doing business as) name. Feel free to file for the DBA on the Colorado Secretary of State’s website.
2. Nominate a registered agent
Every corporation in the state of Colorado requires a Colorado registered agent. The role of the Colorado registered agent is to accept service of process, compliance documents, and government correspondence on the corporation’s behalf.
The registered agent you choose to represent your corporation may be any individual as long as they meet the following criteria:
- The Colorado registered agent must be available during normal business hours
- The Colorado registered agent must have a physical address in the state
- The Colorado registered agent must be at least 18 years of age or older
3. Appoint initial directors at the organizational meeting
The next step in legally forming your Colorado corporation is holding an organizational meeting where a few formalities will need to be handled, such as:
- Creating and approving bylaws
- Determining your corporations share structure
- Selecting initial directors
- Executing the Articles of Incorporation
One of the pertinent steps in this part of the process is appointing initial directors for your Colorado corporation. You’ll need to appoint at least one director who will oversee the business until the first shareholder meeting.
The director is designated to oversee the repeal, amendment, and adoption of the operational or corporate bylaws, as well as the removal, election, and supervision of corporate officers.
4. File Articles of Incorporation
Filing the Articles of Incorporation or Certificate of Incorporation officially and legally sets up your business in the state. The articles need to cover specifics of your business entity, including:
- The names and addresses of incorporators
- The number of authorized shares the corporation is allowed to authorize
- The street address and names of the registered agent
- The name of your corporation, as well as its’ physical or official address
Once you have the relevant information, feel free to file the Articles of Incorporation online with the Colorado state’s office.
5. Create and approve bylaws
Creating and approving corporate bylaws is another crucial step in the process of incorporation in Colorado. Your bylaws are basically the Constitution for your corporation and are essentially the rules that determine how the organization will be operated.
The bylaws need to be compiled in such a way that the priorities and rules of the corporation are made clear to everyone involved.
Your bylaws should include the following information:
- The fiduciary duties to the company
- How contracts will be negotiated
- The date of the board of directors meeting held annually
- The process of adding or amending bylaws in the future
- The process of handling disputes
- How the records will be stored and managed
- The process of holding annual meetings, voting procedures as well as electing directors or officers for the corporation
- The role of directors and officers
- How the corporation will be governed
6. Select a share structure
Stock is a depiction of ownership of a corporation. In other words, the share of stock is the unit of ownership of a corporation. So each unit of stock ultimately depicts a percentage of ownership of the company. So if your corporation decides to issue stock or even one share of stock to a stock owner or shareholder, then that stock owner owns 100% of the corporation.
However, shares can be structured into classes. In this case, each class is labeled a share class and holds different privileges and rights. Multiple classes are also allowed, and each class may hold any amount of shares.
When completing your Colorado Articles of Incorporation, you will be allowed to indicate whether your corporation plans on issuing more than one authorized share class. If the corporation intends to authorize a share class aside from common stock, you should include an additional attachment with the Articles of Incorporation.
7. Obtain an EIN
You’ll need to apply for an EIN, which is an Employer Identification Number or a Federal Tax ID. This is a nine-digit code that the IRS issues to business entities. So you need it whether you are forming a large or small business. It is also used as a form of identification and for tax purposes.
It’s basically a Social Security number for your Colorado corporation or for business owners. However, once you obtain the EIN, it will allow you to fulfill the following tasks:
- Apply for business licenses as and when needed
- Obtain credit and build credit for your business
- Complete payroll for employees
- File taxes for your business
- Open up a business bank account as well as an investment account for your corporation
Internal Revenue Service
Cincinnati, OH 45999
8. File Colorado state taxes
Your Colorado corporation or C corp may be liable for the corporate taxes below:
- Colorado corporate income tax: The state of Colorado has a corporate income tax that all corporations are subject to. You may also have to pay an alternative tax on gross receipts. However, there is no franchise or privilege tax. In the event that your business income passes through you personally, you’ll also be liable for taxation on your personal state tax return.
Colorado taxes corporations are taxed at a flat rate of 4.63%.
- Sales and use tax: As per Colorado law, any online seller that is already required to collect sales tax in the state and grosses over $100,000 in sales from buyers in the state is required to provide a notice that “use tax” is due on the sale. The sale of medical devices, prescription drugs, and groceries is exempt from sales and use tax in the state.
For additional information regarding Colorado corporation taxes, please refer to the Colorado Department of Revenue and Taxation.
9. Colorado business licenses and permits
Your Colorado corporation will need to obtain the relevant licensing and permits in order to conduct business in the state legally.
- Seller’s permit: The seller’s permit is also referred to as a sales tax license, and you need one if you are engaging in business in Colorado. The seller’s permit is applicable to a corporation if you intend to lease or sell tangible personal property that is ordinarily subject to sales tax. Apply for a Colorado sales tax license online.
The Department of Regulatory Agencies website provides additional information on obtaining licenses and permits for your Colorado corporation.
10. Annual report requirements in Colorado
All Colorado corporations conducting business in the state must file a periodic report with the Colorado Secretary of State each year.
The annual report is a state requirement as it provides public disclosure of a business’s operating and financial activities over the past year. Therefore, it is required to remain in good standing with the state.
The Colorado annual report is due annually by the end of the month of initial registration.
11. Costs of starting a corporation in Colorado
The filing fees below apply to all Colorado corporations:
- Name reservation: $25
- DBA name: $20 + $10 renewal fee each year
- Articles of Incorporation: $50
- Annual report: $10
- Colorado Certificate of Good Standing: Free
Next steps after forming a corporation
After spending the necessary time and energy deciding on a business structure and forming your corporation, there are a few other steps you’ll need to take. These steps are necessary to create a solid legal foundation for your corporation and help your business stay strong for years to come.
Follow the steps below after forming your corporation:
Open a business bank account
Opening a business bank account is necessary to separate your business expenses and transactions from your personal ones, irrespective of the type of business you are involved in. It also establishes your corporation as a separate legal entity. Not only will it help streamline your business’s accounting, and protect your personal assets and tax reporting, but it is important for maintaining a corporate veil. Additionally, it minimizes personal liability. In order to open up a business bank account, you’ll need to take your corporation’s formation documents, EIN, and organizational documents to the bank with you.
Secure business liability insurance coverage
Creating a new business or corporation is an essential step toward decreasing or minimizing personal liability. However, it does not substitute insurance. This is because simply starting a corporation is no guarantee that you are unconditionally protected from personal liability. For example, you may be held personally liable if your personal actions result in injury. You’ll also want to protect your corporation from property damages in the event of a lawsuit. Depending on your business needs, insurance or liability protection is available in different forms, so discuss your options with an insurance agent.
Starting a corporation, irrespective of the type of corporation is a relatively simple process. You’ll need to know what forms to file with the relevant government agencies as well as what business licenses and permits to obtain.
The easiest business to start is a sole proprietorship. One person operates sole proprietorships, and this makes incorporating much simpler.
The primary difference between a general corporation and an LLC or limited liability company is that a corporation is owned by its shareholders, while one or more individuals own a limited liability company.
Starting a corporation in Colorado is advantageous for various reasons. Firstly, the lack of franchise taxes applied to corporations is a huge motivator. Additionally, corporations save money on filings and taxes each year.
The most significant difference between C and S corporations is taxes. Whilst C corporations are liable for tax on their income as well as tax on whatever income is received as an owner or an employee, S corporations are not liable to pay certain taxes like double taxation. Instead, the S corporation owner as well as other owners must report the corporation’s revenue as personal income.