Forming your business entity in Delaware, specifically a corporation, gives you a lot of flexibility, but depending on which state you operate in, you may still need to follow local laws.
If you do business in Colorado, you may also need to register with the state. We'll go over the steps and simplify them. But first, how can you tell if you're doing business legally in Colorado?
When to register as doing business in Colorado
The State of Colorado calls Delaware C corps and all other corporations that were formed outside of Colorado "foreign" corporations.
The laws of Colorado don't say exactly what it means to do business in the state. However, the following activities do not require registration with the state, according Colorado statutes:
- Trying to win or settle a lawsuit
- Having an account at a bank in the state
- Using independent contractors to sell
When To Register To Collect Sales Tax In Colorado
Every state has guidelines about when a business must pay sales tax. These are known as sales tax nexus regulations.
You might think of the nexus as a unique version of the state's border; if you execute specified commercial operations within that border, you are compelled to register and pay state sales tax.
Typically, these actions include of the purchase and sale of goods and services.
In Colorado, only sellers that offer physical products or services to Colorado residents are subject to the sales tax nexus laws.
Prior to 2018, the sale or purchase of non-physical items, such as subscriptions to streaming services, SaaS memberships, etc., did not, in general, confer sales tax nexus. In 2018, following an important court decision, this changed. Now, if you purchase or sell intangible products or services in a state, you may have sales tax nexus there.
Colorado Sales Tax Nexus (physical goods and property)
If you sell, lease, or deliver tangible personal property or taxable services, you may be required to register with the Colorado Department of Revenue to collect sales and use tax.
The State website provides more information about physical presence for purposes of sales tax.
Colorado Sales Tax Nexus (non-physical goods and property)
The new state sales tax legislation that apply to non-physical (e.g., online) purchases allow you to qualify for sales tax nexus even if you have no physical presence or goods. To qualify in Colorado, you must surpass a particular criterion.
If your yearly retail sales of tangible personal property, commodities, and/or services into Colorado were less than $100,000 in both the current and preceding calendar years, you are exempt from the state's licensing and collection procedures for sales tax. You must however inform customers of their responsibility to remit sales tax.
If your Colorado retail sales for the current calendar year surpass $100,000, you must begin collecting Colorado sales tax.
Check out the State's website if you wish to delve deeper.
This is not legal advice; it is merely a guide. If you are uncertain as to whether you are subject to Colorado's sales tax nexus, you should consult with your legal counsel and/or an accountant who is knowledgeable in Colorado's legal code and tax rules.
How To Register To Do Business In Colorado
Select a name to conduct business under. This need not be the name you registered in Delaware when incorporating, but it can be.
- Complete an application. You must submit a Statement of Foreign Entity Authority using the state's online portal.
- Pay the charge. Now you pay a $100 filing fee to the Colorado Secretary of State.
- Submit your Foreign Entity Authorization Statement.
- Wait. Typically, processing takes two to four weeks.
After receiving approval to operate as a qualified foreign firm in Colorado, you will be required to adhere to specific regulations.
Compliance as a Qualified Foreign Business in Colorado
To maintain compliance and continue doing business legally in Colorado, you must fulfill two requirements: retaining a registered agent and submitting a periodic report. You will also be required to pay a business income tax.
Registered Agent in Colorado
In Colorado, your registered agent is your point of contact with local authorities. If your company does not have a physical location in Colorado, finding a registered agent to receive state notices on your behalf may be beneficial.
A registered office in Colorado is necessary for foreign firms. The office must be an actual address of your registered agent or a recognized registered agent service, not a P.O. box.
Any vital information, such as business mail, will be forwarded to you by your registered agent. A number of companies hire registered agents on a contract basis. They usually cost between $50 and $100 each year.
Periodic Reporting In Colorado
The periodic report in Colorado is similar to the annual report in most other states. Every year, you must file a statement with the State, updating any changes to the company address or the composition of the Board and officers. You’ll include info like:
- The legal name of your business
- The name and address of your registered agent
- The names and addresses of board members, managers, and officers
There is a $10 fee for filing your periodic report.
Colorado's Business Income Tax
Finally, Colorado has a corporate income tax. The business income tax works similarly to other corporate income taxes in that it is a tax levied directly on your company's earnings. Visit Colorado's Department of Revenue's instructions for more information on filing and paying your annual taxes.
Sales Tax In Colorado
Hiring And Paying Employees In Colorado
In Colorado, federal and state rules require you to record new hires within 20 days after their start date. The Colorado employer online portal allows you to report new hires.
Paycheck withholdings should be handled by your payroll provider, but you must register as an employer with the State and create an online employer account.
Colorado provides the following information for a thorough guide to your obligations.
The Easiest Way To Register Your Business In Colorado
To get your business registered in Colorado, you have to keep an eye on a lot of different things. If you don't file the right forms, give the right information, or keep up with compliance laws, it can cause you a lot of difficulty.
It's easy to do with Capbase. When you form your Delaware corporation on Capbase, we'll give you the information you need to do business in Colorado and keep you up to date on any filings you need to make.
The compliance calendar in your Capbase account will let you know when you need to pay fees, file reports, or do other things to keep your startup in good standing with Colorado state officials. Try Capbase today.
Written by Beth Zhao
Beth is a second year law student at The George Washington Law School. She is a member of the Public Contract Law Journal.
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