Starting a Business in Colorado

A new business in Colorado can be within your reach. Have you been wondering: just how do I start a business in Colorado? And more importantly, can I do so no matter what the economic conditions are? Can I start a new business in Colorado during a recession?

A New Business in Colorado: Pros and Cons

First of all, Business Insider puts Colorado in its top twenty states when it comes to starting a new business, according to a 2016 article. And this is for the entire nation. Colorado has an above average per capita GDP. But there is also low availability and education level of possible employees to hire. Still, more businesses opened than closed in this state.

Good Recent Upsurge

In 2018, Fit Small Business named Colorado the eighth best state to start a business in. But keep in mind, the methodologies for Fit Small Business and Business Insider differ.

Why the change? It is one of the best states for accessing health care, but where it really shines is in its labor market. Coming in second overall, Colorado does extremely well in the venture capital and per capita income subsections. The addition and growth of the new cannabis industry has got to be helping, too.

Start a New Business in Colorado – Colorado Trade Names

If a business owner wants to avoid using their personal name as a business name, they can file for a trade name. Select the Register a Trade Name option on the Colorado Secretary of State website in order to begin the process. A business owner should also search through names of other businesses to ensure that the trade name they have in mind is available. Be sure to use the Records Search webpage in order to browse through existing business entity names.

Start a New Business in Colorado – Colorado Top Industries

Per Choose Colorado, the state’s biggest industries are aerospace; advanced manufacturing; and the creative industries. Colorado’s top industries also include bioscience; defense and homeland security; and electronics. Colorado also has top industries in financial services; energy and natural resources.

Plus Colorado has top industries in health and wellness; and food and agriculture. More top industries in Colorado are infrastructure engineering; and technology and information. Finally, Colorado also has top industries in outdoor recreation; tourism; and transportation and logistics. Marijuana has also been legal in Colorado longer than anywhere else in the whole country.

Savvy business owners should be able to spot opportunities with these major industries. These could include trucking parts for any industry or supplying the health care industry. Or there can be opportunities in inventing and working on safety devices and equipment for agriculture. Plus there are more opportunities with food service and hospitality for the thriving tourism industry. There are also opportunities within the marijuana industry. However, a business in this industry may possibly be flagged by lenders as risky.

Here is how to start business in Colorado.

Start a New Business in Colorado – Colorado New Business Secretary of State Requirements

Register a Business Name

A business owner who wants to avoid using their personal name as a business name can file for a trade name. Select the Register a Trade Name option on the Colorado Secretary of State website to begin the process.

The business owner should also be sure to search through names of other businesses. This is to ensure that the trade name in mind is available. Use the Records Search webpage in order to browse through existing business entity names.

There are some rules just for corporations. The name of a Colorado corporation must include the word “corporation,” “incorporated,” “company,” “limited,” or “association”. Or it can have an abbreviation of one of these words. A business owner can learn more about the corporate naming policy in Colorado online at Colorado Corporation Name Requirements on the Colorado Secretary of State website.

Business Permits and Licenses

Check with the Colorado Department of Revenue. Learn about businesses needing special licenses.

Local Permits and Licenses

Check with your local municipality, city or county office or website. See if there may be any local licensing or permit requirements. E. g., in Colorado Springs, go to the Business Licensing page on the Colorado Springs city website.

Business Registration

Get forms or file online at the Colorado Secretary of State..

Tax Registration

Go to the Colorado Department of Revenue. In particular, head to the Colorado Department of Revenue Taxation page.

Start a New Business in Colorado – Virtual Offices

Alliance offers several location choices for business owners looking for Colorado virtual business office addresses. They have offices in these cities:

• Aurora
• Boulder
• Broomfield
• Colorado Springs
• Denver
• Golden
• Greenwood Village
• Lone Tree
• Louisville

In addition to the above cities, DaVinci has Colorado virtual business space in Lakewood, Littleton, and Longmont.

For other areas of the state, be sure to check with Regus. Or business owners might want to seek out local entrepreneurs. Or they could even speak with computer user groups in an effort to find help in this area.

Learn more here and get started toward opening a new business in Colorado.

Start a New Business in Colorado – Build Business Credit

Company credit is credit in a small business’s name. It doesn’t connect to a business owner’s personal credit, not even if the owner is a sole proprietor and the solitary employee of the small business.

Thus, a business owner’s business and personal credit scores can be very different.

The Benefits

Considering that business credit is independent from personal, it helps to secure an entrepreneur’s personal assets, in the event of litigation or business insolvency.

Also, with two separate credit scores, an entrepreneur can get two different cards from the same vendor. This effectively doubles buying power.

Another benefit is that even startup companies can do this. Heading to a bank for a business loan can be a formula for frustration. But building business credit, when done right, is a plan for success.

Personal credit scores are dependent on payments but also additional considerations like credit use percentages.

But for small business credit, the scores really merely depend on if a company pays its bills timely.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

The Process

Building small business credit is a process, and it does not occur without effort. A business will need to proactively work to establish company credit.

Nonetheless, it can be done easily and quickly, and it is much faster than building consumer credit scores.

Vendors are a big part of this process.

Performing the steps out of order will cause repetitive rejections. No one can start at the top with small business credit. For example, you can’t start with retail or cash credit from your bank. If you do, you’ll get a denial 100% of the time.

Start a New Business in Colorado – Small Business Fundability

A business has to be fundable to credit issuers and merchants.

For that reason, a small business will need a professional-looking website and email address. And it needs to have site hosting from a supplier such as GoDaddy.

Plus, business telephone and fax numbers should have a listing on ListYourself.net.

Likewise, the company telephone number should be toll-free (800 exchange or similar).

A company will also need a bank account dedicated only to it, and it needs to have every one of the licenses essential for operation.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

Start a New Business in Colorado – Working with the IRS

Visit the Internal Revenue Service web site and acquire an EIN for the small business. They’re totally free. Choose a business entity such as corporation, LLC, etc.

A small business can start off as a sole proprietor. But they will more than likely want to change to a form of corporation or an LLC.

This is in order to reduce risk. And it will maximize tax benefits.

A business entity will matter when it pertains to taxes and liability in the event of a lawsuit. A sole proprietorship means the owner is it when it comes to liability and taxes. No one else is responsible.

Sole Proprietors Take Note

If you run a business as a sole proprietor, then at least be sure to file for a DBA. This is ‘doing business as’ status.

If you do not, then your personal name is the same as the small business name. As a result, you can wind up being personally liable for all small business financial obligations.

In addition, according to the IRS, using this structure there is a 1 in 7 probability of an IRS audit. There is a 1 in 50 chance for corporations! Avoid confusion and dramatically reduce the odds of an IRS audit as well.

Starting Off the Business Credit Reporting Process

Begin at the D&B website and obtain a free D-U-N-S number. A D-U-N-S number is how D&B gets a company in their system, to generate a PAYDEX score. If there is no D-U-N-S number, then there is no record and no PAYDEX score.

Once in D&B’s system, search Equifax and Experian’s web sites for the small business. You can do this at fastcs.wpengine.com/reports. If there is a record with them, check it for correctness and completeness. If there are no records with them, go to the next step in the process.

In this manner, Experian and Equifax will have something to report on.

Vendor Credit Tier

First you should establish trade lines that report. This is also called the vendor credit tier. Then you’ll have an established credit profile, and you’ll get a business credit score.

And with an established business credit profile and score you can start to acquire credit in the retail and cash credit tiers.

These kinds of accounts tend to be for the things bought all the time, like marketing materials, shipping boxes, outdoor work wear, ink and toner, and office furniture.

But first of all, what is trade credit? These trade lines are credit issuers who will give you preliminary credit when you have none now. Terms are typically Net 30, versus revolving.

Therefore, if you get an approval for $1,000 in vendor credit and use all of it, you need to pay that money back in a set term, such as within 30 days on a Net 30 account.

Details

Net 30 accounts need to be paid in full within 30 days. 60 accounts need to be paid fully within 60 days. Compared to with revolving accounts, you have a set time when you must pay back what you borrowed or the credit you made use of.

To kick off your business credit profile the right way, you need to get approval for vendor accounts that report to the business credit reporting bureaus. As soon as that’s done, you can then use the credit.

Then pay back what you used, and the account is on report to Dun & Bradstreet, Experian, or Equifax.

Vendor Credit Tier – It Makes Sense

Not every vendor can help in the same way true starter credit can. These are vendors that will grant an approval with very little effort. You also need them to be reporting to one or more of the big three CRAs: Dun & Bradstreet, Equifax, and Experian.

You want 5 to 8 of these to move onto the next step, which is the retail credit tier. But you may need to apply more than once to these vendors. So, this is to validate you are responsible and will pay punctually.

Retail Credit Tier

Once there are 5 to 8 or more vendor trade accounts reporting to at least one of the CRAs, then progress to the retail credit tier. These are service providers which include Office Depot and Staples.

Just use your Social Security Number and date of birth on these applications for verification purposes. For credit checks and guarantees, use the small business’s EIN on these credit applications.

One instance is Lowe’s. They report to D&B, Equifax and Business Experian. They want to see a D-U-N-S and a PAYDEX score of 78 or better.

Fleet Credit Tier

Are there 8 to 10 accounts reporting? Then move to the fleet credit tier. These are service providers such as BP and Conoco. Use this credit to purchase fuel, and to repair, and take care of vehicles. Just use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, make certain to apply using the company’s EIN.

One such example is Shell. They report to D&B and Business Experian. They want to see a PAYDEX Score of 78 or more and a 411 company telephone listing.

Shell might claim they want a particular amount of time in business or profits. But if you already have sufficient vendor accounts, that won’t be necessary. And you can still get approval.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

Cash Credit Tier

Have you been sensibly managing the credit you’ve gotten up to this point? Then progress to the cash credit tier. These are companies such as Visa and MasterCard. Only use your Social Security Number and date of birth on these applications for verification purposes. For credit checks and guarantees, use your EIN instead.

One such example is the Fuelman MasterCard. They report to D&B and Equifax Business. They want to see a PAYDEX Score of 78 or better. And they also want you to have 10 trade lines reporting on your D&B report.

Plus, they want to see a $10,000 high credit limit reporting on your D&B report (other account reporting).

Additionally, they want you to have an established business.

These are service providers like Walmart and Dell, and also Home Depot, BP, and Racetrac. These are frequently MasterCard credit cards. If you have 14 trade accounts reporting, then these are attainable.

Start a New Business in Colorado – Monitor Your Business Credit

Know what is happening with your credit. Make sure it is being reported and attend to any errors ASAP. Get in the practice of checking credit reports and digging into the specifics, and not just the scores.

We can help you monitor business credit at Experian and D&B for 90% less than it would cost you at the CRAs.

See: fastcs.wpengine.com/monitoring.

Update Your Data

Update the relevant information if there are errors or the relevant information is incomplete.

Start a New Business in Colorado – Fix Your Business Credit

So, what’s all this monitoring for? It’s to dispute any errors in your records. Mistakes in your credit report(s) can be fixed. But the CRAs often want you to dispute in a particular way.

Disputes

Disputing credit report errors normally means you mail a paper letter with duplicates of any proofs of payment with it. These are documents like receipts and cancelled checks. Never send the original copies. Always mail copies and retain the originals.

Fixing credit report inaccuracies also means you precisely itemize any charges you challenge. Make your dispute letter as understandable as possible. Be specific about the problems with your report. Use certified mail so that you will have proof that you sent in your dispute.

A Word about Building Business Credit

Always use credit sensibly! Never borrow beyond what you can pay back. Keep track of balances and deadlines for repayments. Paying on time and in full will do more to elevate business credit scores than pretty much anything else.

Building small business credit pays off. Excellent business credit scores help a small business get loans. Your loan provider knows the company can pay its debts. They recognize the business is for real.

The business’s EIN links to high scores and lending institutions won’t feel the need to demand a personal guarantee.

Business credit is an asset which can help your small business in years to come.

Want to start a new business someplace else in America? Then check out our handy guide to starting a business in any state in the country.

Colorado’s Response to COVID-19 

Here’s what Colorado is doing about COVID-19. In Colorado, The Pikes Peak SBDC is the lead for statewide disaster preparedness efforts in response to COVID-19. The Colorado government offers work sharing as an alternative to laying off employees. Requirements and qualifications for employers are you must have reduced normal weekly work hours by at least 10%, but by no more than 40%. 

The reduction must affect at least two out of all employees in the business, or a minimum of two employees in a certain unit. And you must have paid as much in premiums as we paid your former employees in unemployment insurance benefits. 

See: pikespeaksbdc.org/what-we-do/programs/disaster-relief 

And see colorado.gov/pacific/cdle/layoffassistance