Colorado Business CPA
June 21, 2014
1. Create a Limited Liability Company
When first starting a business, we recommend creating a Limited Liability Company first. There are several reasons why we recommend doing this. The cost is only $50.00 to register with the Colorado Department of State, and an LLC can save you a few thousand bucks at the end of the year (if you make a profit). We would not recommend to start your business by incorporating (filing articles of incorporation) as it creates a separate tax return ( either C-corporation or S-corporation) when perhaps you don’t need one in the first few years. Your LLC activity will be reported on Schedule C of your Individual Tax Return; Form 1040 (provided you don’t have business partners, besides your spouse).
2. Obtain Employer Identification Number (EIN)
Securing an Employer Identification Number (also known as a Federal Tax Identification Number) is the first thing that needs to be done after you create the LLC since many forms will require this number. EINs are issued by the IRS to employers, sole proprietors, corporations, partnerships, nonprofit associations, trusts, estates, government agencies, certain individuals, and other business entities for tax filing and reporting purposes. Your EIN will be used to open bank accounts, pay your employees, file tax returns and report your business earnings via form 1099-Misc you might receive from your customers. The fastest way to apply for an EIN is online through the IRS website or by telephone. Make sure you apply during business hours and choose to receive EIN electronically. It will be available to you right after you complete your application.
3. Register with Colorado Department of Revenue
Once you have your EIN, you need to fill out forms to establish an account with the State. You need to fill out form DR 0100. This form will register you for sales, use and State withholding taxes. If you collect sales taxes, you need to submit taxes monthly, quarterly or annually depending on the amounts collected. Use tax return needs to be filed annually and use tax should be paid on the items purchased for business use without paying sales tax (usually items purchased outside Colorado or from the private party). Wage withholding taxes are submitted when your business has employees.
4. Register with Local Tax Authorities
If you do business from Denver, you might also be responsible for Denver Occupational Privilege Tax (OPT). This tax is paid regardless of whether you have employees or not. Occupational Privilege Tax is also applicable in other cities. Please check on the official website for your city or call our office if you have questions.
You will want to know how your business is doing financially and QuickBooks software can help you to solve this problem. QB ( QuickBooks) online can be a good tool for a startup company, as it provides access to your company’s financial records anywhere where the Internet is. You can download all transactions from your business bank account electronically as well. If you need training or have a few questions about how to use QuickBooks, please call us, we will be very happy to help! Keep all your receipts and track your business mileage. Please contact our firm if you have additional questions regarding S-corporation conversions (we also specialize in late S-corporation conversions), payroll, bookkeeping, business and individual taxes.