Whether you’re starting a business in Colorado or somewhere else, you’ll want to take a few steps that will protect you, save you money, and allow you and your business to grow with your customer base.
1. Incorporate your business in your home state. You’ll get a lot of advice about incorporating in states that will shield you from taxes or that give you greater anonymity or asset protection strategies. Ignore that advice. With few exceptions, your best and most cost-effective business strategy is to incorporate in your home state.
2. Don’t overdo your corporate setup. Talk to an accountant if you’re confused over incorporating as a regular corporation or a limited liability company (LLC). You might get some advantages from an LLC structure if you’re holding real estate or other large assets in your company, but you’ll probably save setup fees and overall complexity with a regular corporation, particularly if you’re the only person in the company.
3. Get an employer ID number (EIN) from the IRS. Even if you’re the only employee, you’ll need an EIN to open a bank account and to set up accounts with customers.
4. Talk to your accountant about filing an “S-election” application with the IRS. If you elect to be taxed as an S corporation, your business income will flow through to your personal taxes and your year-end tax filing obligations will be easier to handle.
5. Keep records and receipts. You can charge your business expenses against its income and reduce your tax burden. You’ll need records and receipts to prove those expenses if the IRS challenges any deductions.
5. Keep records and receipts. You can charge your business expenses against its income and reduce your tax burden. You’ll need records and receipts to prove those expenses if the IRS challenges any deductions.
After you establish your company and you’ve started selling your products or services, you’ll probably be too busy to think of or handle these startup steps. If you take care of them early in your business planning, you’ll be ahead of the curve and your business will operate on a solid corporate foundation.
When you’re starting a business, you’ll get a lot of conflicting advice both from well-meaning advisors and from people who just want your money. Much of that advice is offered on a one-size-fits-all basis. Find a business startup strategy that feels natural and not one that you feel sold on.
Work with companies that provide you value without trying to sell you without learning about you. Here’s a link to my e-book where you can download it for free for taking an interest in my post.
