How to Start a Business in Colorado: Accounting & Taxes Checklist

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Launching a startup in Colorado is an exciting decision, but ensure your accounting and taxes are in order from the get-go. This checklist leads new business owners through the important financial and compliance steps to establish good bookkeeping, tax readiness, and reporting that directly pertains to Colorado based operations.

Pick a type of business to compare tax consequences

What type of business structure you pick will impact how you pay taxes, how income is reported and what sort of accounting practices you’ll need to set up. Common forms of a business The most successful business entities are sole proprietorship, partnership, limited liability company (LLC) and corporation. So each entity has to file differently, for federal tax and Colorado tax purposes. Thoughtful decisions early on, here influence how you will be able to do your bookkeeping and who is responsible for payroll, as well as who is making estimated tax payments.

Register and license your Colorado business.

Ahead of Making Sales – Register With Colorado Revenue And Secure Necessary State Tax LIcense(s) Before soliciting sales check you've got all proper registration and state tax permits. If you’re hiring or willing to entertain sales, have any pertinent state registrations in place. You’ll also need to have a federal employer identification number (EIN) for tax payments and payroll to set up; order that early and keep a safe, record of it.

This means you’ll need to open a business bank account with ListGroupop.

Explain why: Separating business and personal money from the start. Having a business bank account can make tax time so much easier, and it provides a clean trail to manage earnings and expenses, not to mention that it helps immensely when keeping track of bookkeeping. If your business will be set up to accept payments in person or online, set up merchant accounts or payment processing plans that link back to your business account.

Set Up Accounting System and Chart of Accounts

Andenne dangerously needs She an for the accounting plan (cash or Various small, ask won't test tax expert. Create a clearly defined chart of accounts tailored to how you do business: revenue streams, cost of goods sold, operating expenses, payroll differentials, taxes and owner’s distributions. Consistent category definitions make reconciling monthly and annual reporting a cinch.

Maintain your expenses and receipts

Establish a system for sorting through and storing receipts and invoices. Track your deductible expenses, which include supplies, rent, utilities and advertising as well as startup costs. You might even want to create a system of regularly saving or filing digital receipts so that you have documentation of the deductions in the event you get audited. Compare receipts to bank and credit card statements.

Become familiar with Colorado Sales Tax and Use tax law

Your business may need to gather Colorado sales tax If you’re selling goods and some services. Locate the correct sales tax rate and apply for a Colorado sales tax account. Keep an account of your taxable and non-taxable transactions and file the sale tax return promptly to avoid any penalties.

Taking care of employee taxes and getting payroll set up!

If you plan to have employees, get Colorado employer withholding tax accounts and state unemployment insurance requirements. Establish pay cycles, payroll tax withholding and reporting. Maintain detailed books of hours, wages and payroll deductions. The issues start with payroll tax withholding and filing.

Estimated Taxes & The Best Way To Periodically Deduct Them · If you are a contractor, or freelancer most likely you have to file for estimated taxes.

For most small businesses, the business owner or owners pay in estimated taxes each quarter on their federal and state income taxes. It’s a good idea to project your taxable income often and set aside money for estimated payments. This also results in the books and records, and receipts (in quotes), as well as cash flow being up-to-date – estimates should reflect reality, after all.

Log assets (and depreciate them off against startup costs)

Record business assets, and take the depreciation treatment that you should be taking. Record startup and organizational costs in separate accounts so that the optimal deductions are taken and they can be amortized appropriately. An accurate accounting of assets will aid in securing insurance coverage and allow for future financial planning.

Write down all deductible taxes and credits

Record instances of business use of home, auto use and other common deduction categories. Keep the following documents along with your tax return: mileage logs, home office computations and check stubs to substantiate business meals and travel. There might be Colorado-specific credits or incentives for particular industries or investments — investigate eligibility and keep excellent records of the activities that qualify you.

Yearly disclosure reports and local laws coming your way

Learn about Colorado’s annual or business-specific deadlines here. Some local communities have extra licensing or business personal property filings. Just be sure to know when your annual report, franchise tax or business license renewal is due so you can keep in good standing.

Establish internal policies and financial review procedures

Implement internal controls to minimize risk of error and fraud: segregation of duties for billing and approval, monthly or weekly bank reconciliations, restricted access to financial accounts. Conduct monthly financial reviews to monitor on your profit, cash flow and KPIs that are holding links back into your business.

Keep the relationship with a tax pro That said, keep up your connections to a professional who prepares taxes ho you enjoy working with.Because it curould change. entrenched.

Yes, you can manage some of your accounting on your own, but build a relationship with an expert tax advisor knowledgeable in Colorado tax law. A tax professional may help not only with planning, entity selection and credits or incentives, but also in looking ahead to an audit.

“Your expectations on growth and scale should be audited.

Revisit your accounting systems when you have more revenue and more employees. migrate from manual spreadsheets to scaleable bookkeeping processes as needed Write SOPs for financial tasks Implement scaleable methods for payroll and invoicing.

Final checklist summary

• Choose an Organization and Have your Colorado Tax System Account Setup.
• Obtain an federal EIN and query state tax accounts.
• Business banking and separate accounts.
• Chart of accounts and Journal Routine of bookkeeping.
• Sign up for, and comply with Colorado sales tax if necessary.
• Prepare and process payroll and deductions for life cuts.
• Keep track of receipts, assets and depreciation, as well as startup costs.
• Make estimated tax payments quarterly, file annual returns.
• Maintenance of records for deductions and local filings.
• Establish internal controls and consult a tax professional.

Correct accounting and tax practices from the start will reduce your risk and enable you to focus on growing. Use this checklist to build a solid financial foundation for your Colorado business, and revisit all these items as you grow over time.