How to Incorporate in Colorado (May 2024 Update)
Colorado is a beautiful state filled with incredible natural scenery, diverse industry, and a thriving entrepreneurial spirit. With a growing population and a business-friendly legal environment, Colorado also offers significant potential as a location to start and grow a company. Incorporating in Colorado establishes your business as a separate legal entity protected from personal liability, allows you to more easily raise investment capital, and provides credibility with customers and partners.
This article will guide you through the key steps for incorporating in Colorado, help you understand the differences between corporations and LLCs, outline the taxes and maintenance requirements to operate legally, and provide additional resources to launch your venture successfully.
Benefits of a Colorado Corporation
The primary advantage of incorporating in Colorado or any state is personal liability protection. As a corporation, your personal assets like your home, car, and investments can't be seized to pay off company debts or legal judgments. A corporation is also the only entity that can issue and sell stock to investors, making it easier to attract investment capital. Corporations can continue operating perpetually and ownership is easily transferable through buying/selling of shares. These traits make the corporate structure appealing if you intend to grow the business significantly. Colorado also offers a simple incorporation process, reasonable fees to form and maintain your company, and low corporate taxes.
Steps to Incorporate in Colorado
1. Choose a Unique Business Name
The first step is choosing an original name for your Colorado corporation. You'll want to brainstorm memorable names related to your offering and ensure another local company isn't already using the name to avoid confusing customers. You can check name availability on the Colorado Secretary of State website. Your final business name must include a corporate designation like "Incorporated", "Corporation", "Limited", or their respective abbreviations. You can optionally reserve your preferred business name for 120 days while completing additional steps.
2. Appoint a Registered Agent
A Colorado registered agent is a person or company designated to receive important legal documents like summons, subpoenas, or notifications from the state government on behalf of your corporation. You can designate yourself, a company executive, or hire a professional Registered Agent service. The registered agent must maintain an address open during normal business hours in Colorado to accept documents. Using a professional agent service can provide more privacy since your role isn't public record.
3. File Articles of Incorporation
The Articles of Incorporation legally establishes your Colorado corporation with the state. The articles requires your corporation's name and purpose, the street addresses for your main headquarters and registered agent's office, your registered agent's name, details of stock shares to be issued, and the name/address of whomever is submitting the articles (which is publicly viewable).
You must file your Articles of Incorporation electronically on the Secretary of State website with the $50 filing fee. Once filed and approved, you will receive confirmation and access to your corporation documents via the Secretary of State portal. Filing the articles officially creates your company!
4. Obtain an Employer ID Number (EIN)
An EIN is essentially your business's social security number, issued by the IRS for federal tax purposes. As a corporation, you need an EIN to file business tax returns. An EIN also allows you to open company bank accounts, apply for business licenses, and hire employees. You can easily get an EIN for free direct through the IRS website.
5. File a Beneficial Ownership Information (BOI) Report
As of January 2024, nearly all corporations will need to file a BOI report after incorporating in Colorado. This provides identifying details on owners with significant corporate control (25%+ ownership stake) to federal agencies. Some industries like large operating companies, banks, investment funds are exempt from filing a BOI report.
For new Colorado corporations formed after 2023, your first BOI report must be filed within 90 days of incorporating. You'll need full legal names, birth dates, addressed, and ID numbers of your company's beneficial owners. The report also requires basic information on your corporation like addresses, EIN, etc.
6. Write Corporate Bylaws
Corporate bylaws establish operating rules regarding corporate management, finances, meetings, voting procedures, election/removal of officers and directors, ownership transfers. Bylaws help avoid internal disputes by codifying policies chosen by owners early on. While not legally required in Colorado, adopting clear bylaws is highly recommended.
7. Hold an Organizational Meeting
Shortly after incorporating, you should hold an initial meeting between founders and shareholders to take foundational actions like adopting bylaws, appointing directors/officers, issuing stock certificates, and opening corporate bank accounts. Details discussed during the first meeting should be logged in official meeting minutes included in the company records.
8. Open a Business Bank Account
A separate business bank account is crucial financial step because it segments company funds from your personal finances, which supports liability protections. The account also gives transparency to track income, expenses, payroll, taxes. To open an account, banks will request documents like your Approved Articles of Incorporation, Corporate Bylaws, and EIN.
For more information, take a look at our article on the key benefits of business checking accounts.
9. Register with the CO Department of Revenue
All Colorado corporations must register for state tax obligations through the Department of Revenue's Revenue Online portal. You'll need your EIN to create an account. Registration ensures you receive communications regarding state tax returns, forms, payments so you avoid penalties by staying compliant.
10. File Annual Reports and Taxes
After incorporating, you must file an annual report with updates about company details and pay an annual $10 fee to the Secretary of State to remain compliant. Colorado also levies a low 4.63% corporate income tax that is due annually. Federal taxes include estimated quarterly income tax payments, payroll taxes if you have over employees, and annual tax return.
LLC vs. Corporation in Colorado
While this guide focuses on Colorado corporations, forming a limited liability company (LLC) is alternatively an excellent option for small businesses. Compared to corporations, LLCs require less onerous record keeping, have flexible ownership rules, and taxation happens on personal returns vs. company returns avoiding double taxation. Corporations can better attract investors, but LLCs are generally simpler to run. Review key legal and tax differences to determine if an LLC or corporation makes most sense.
Conclusion
The process of legally forming and maintaining a Colorado corporation has been simplified in recent years to enable more entrepreneurs to turn ideas into real businesses efficiently. But it still entails following key steps like choosing a business name, designating a registered agent, filing articles of incorporation, writing bylaws, opening a bank account, staying compliant with state annual reports and taxes.