Colorado has quickly become a major player in entrepreneurialship. According to the Kauffman Index, which measures entrepreneurial trends in the U.S., Colorado is ranked the fifth best state to start a business. While starting a business can be an exciting endeavor, doing so is not an easy feat.
You will have to decide on the business entity you wish to start and apply for various federal, local and state licenses. Law Offices of Clifton Black, PC has laid out basic information on business formation in Colorado. It’s advised you consult with a certified public accountant and business attorney before deciding which business entity is right for you.
Business Lawyer in Colorado Springs, CO
The first task on your checklist for starting a business should be to retain legal counsel. A business attorney can provide an in-depth explanation of the business formation process and ensure all the proper steps are taken. Law Offices of Clifton Black, PC has experience assisting in the creation of business entities as well as preparing operating agreements, bylaws, business purchase agreements and more.
Call (719) 328-1616 to schedule a time to consult with us. Law Offices of Clifton Black, PC assists with business endeavors in areas such as El Paso, Pueblo, Teller, Douglas, Denver, Elbert, Fremont, Pueblo, Lincoln and Arapahoe counties.
- Does Colorado Require Corporate Bylaws?
- Different Types of Partnerships
- How will Taxes Effect my Business?
- Additional Resources
Does Colorado Require Corporate Bylaws?
Bylaws are an integral part of forming a corporation. These rules act as the laws of a corporation and how it should be run. Most states require bylaws when starting a corporation, but Colorado does not. While they are not required, it’s highly advised these guidelines are drafted anyway.
One of the first tasks of the board of directors of a new corporation should be drafting bylaws. There is crucial information that should be included in these “laws.” Some of this information includes:
- Identifying information of the corporation such as name, address and whether the corporation will be private or public
- Information about the board of directors such as the number of members and their powers and duties. It’s also advised to include the number of directors needed for a quorum.
- Procedures on how to maintain corporate records such as where record books should be located and rules on how they should be prepared and inspected.
- Procedures for amending bylaws and article of incorporation
Keep in mind that bylaws are only used for corporations. Partnerships and LLC have similar rules, but they utilize partnership agreements and operating agreements. Bylaws should not be looked at as a DIY project. These are complex documents that should be prepared by an experienced business attorney.
Different Types of Partnerships
A partnership shares similarity with a sole proprietorship, except a partnership is composed of two or more people. There are various partnerships offered in Colorado, each with its own set of pros and cons. Listed below is a brief explanation of a few of the different types of partnerships offered in Colorado.
- General Partnership: In this partnership, owners will work together to run the business. The partners in a general partnership may be trusts, individuals, corporations or other partnerships. Unless otherwise stated in a partnership agreement, partners equally share the profits and losses. Each partner is also liable for the partnership’s liabilities.
- Limited Partnerships: Limited partnerships includes a general partner and other limited members. The general partner is responsible for managing the business and is solely liable for the obligations of the business. The other limited partners have no liability in the company nor any acting roles in management. Allocation of gains and losses are not divided equally. Instead, they are based on the contribution of each partner.
- Joint ventures: A joint venture can be described as a business endeavor undertaken by two or more people who engage in a single project. Joint ventures are more limited in both scope and duration than a general partnership. Each partner is responsible for the losses, profit and cost associated with the venture. However, the venture is considered its own entity and separate from the participants’ other business interests.
How will Taxes Effect my Business?
How your business will be taxed is a common concern when starting a business. How this financial charge will impact your business depends on whether you have a corporation, partnership or proprietorship. Listed below is a brief explanation of how taxes will affect certain business types:
- C Corporations: A C corporation is a legal entity under the law, and therefore pays incomes taxes based on the returns of the business. The biggest drawback of a C corporation is the entity is taxed on its profits, and the stockholders are taxed on dividends. This business entity is also required to pay local, state and federal taxes.
- S Corporation: All the profits and losses of an S corporation pass through the stockholders’ personal taxes. The profits of this business entity are not taxed, but employee earnings are taxed at a higher rate than dividends.
- Partnerships: Partnerships do not pay income taxes. Instead, the business passes any losses or profits to its partners. Partners then include their share of the business’ loss or income on their personal tax returns.
- Sole Proprietorship: Income from this business entity is not taxed on the business level. The income is considered income of the individual and the individual is responsible for paying income taxes. A sole proprietorship can also deduct business-related expenses.
Additional Resources for Business Law
Business FAQ | Colorado Secretary of State – Visit the official website of the Colorado Secretary of State to read through an FAQ forum on starting a business. You can find answers to questions such as what to do if you want to begin a partnership, how to form S and C corporations and how to obtain a business license.
Checklist for New Businesses | Colorado Secretary of State – Follow the link to view a checklist of federal, state and local requirements for starting a business in Colorado. Some of the requirements include obtaining the proper insurance, applying for a license with the Department of Regulatory Agencies and registering with the Colorado Secretary of State.
Business Attorney in Colorado Springs, CO
Whether you need assistance forming a business or drafting a contract, Law Offices of Clifton Black, PC is here to help. We have proven experience assisting clients with business matters such as forming a corporation, negotiating lease agreements and other types of contracts.
You can schedule a time to speak with us at (719) 328-1616. Law Offices of Clifton Black, PC assists clients in areas such as Colorado Springs, Denver, and Littleton.