Setting up a Colorado Corporation

How do I set up a Colorado Corporation?

You’ve decided to form a corporation for your new business. The corporation structure offers the greatest separation of the operations of the business from the members of the LLC, provided that the members have taken steps to actually separate the business from the members, but at the expense of greater administrative overhead. So what now? How do I set up my corporation? You can fill out the simple forms provided and HLGGC will create your corporation, create your bylaws and shareholders agreement, help you hold your initial board meeting, issue stock, help you file for the necessary licenses and permits, and advise you on how to protect your interests; or you can follow the steps below and do it yourself.

Follow these steps to setup your corporation:

1. Name your company. – Your corporation's name must be unique and it must comply with the Colorado Revised Statutes. The business division of the website maintained Colorado Secretary of State allows a user to perform a search of registered names. The United States Patent and Trademark Office ("USPTO") allows users to perform searches via the Trademark Electronic Search System ("TESS"). Your corporation must also contain one of the following terms or abbreviations, "corporation", "incorporated", "company", "limited", "corp.", "inc.", "co.", or "ltd.", unless that corporation meets certain requirements for exceptions. If you choose to have HLGGC complete and file your articles of incorporation, HLGGC will search the state records to determine the name availability of the new corporation and perform a basic search of TESS maintained by the USPTO.
2. Determine and appoint the initial directors. – Colorado requires that a corporation have at least one director. While the corporation’s shareholders will elect subsequent directors, the corporation owners appoint the initial directors. The directors of a corporation are responsible for making the overall business and financial decisions of the corporation. Directors are responsible for hiring or appointing corporate officers and setting their salaries, authorizing the issuance of stock, approve the any debts or credit arrangements and much more. The owners of the company often appoint themselves as the initial directors, but this is not required.
3. File the Articles of Incorporation. – You must complete and file the articles of incorporation for the corporation. The corporation will be formed when the Colorado Secretary of State accepts the articles of incorporation. The articles of incorporation must state the following items: the name of the corporation, the information regarding the issuance of shares as required by C.R.S. § 7-106-101, the principal place of business, the registered agent name and address, and name and mailing address of each incorporator. Colorado Secretary of State allows, and requires, you to use the Colorado Secretary of State website to complete and file the articles of incorporation. Colorado allows a corporation to include additional information about the corporation as defined by C.R.S. § 7-102-102(2).
4. Prepare the Corporate Bylaws. – A corporation specifies the operating rules of the corporation within its bylaws. The bylaws may contain rules regarding scheduled meetings, establishing a quorum, appointing directors, the issuance of shares, voting requirements and more.
5. Prepare the Ownership/Shareholders Agreement. – The shareholders hold the ownership of a corporation. A shareholders agreement will specify what will happen when a shareholder desires to sell their interest, retires, becomes disabled or incapacitated or dies.
6. Initial board meeting. – The initial directors will hold an initial board meeting where they will make certain decisions that will affect the way the corporation will conduct business. The board will typically adopt the bylaws, appoint officers, authorize the issuance of stock, accept the corporate stock certificate, set the financial year, decide on S Corporation status, and more as required by the corporation.
7. Issue stock. – The corporation will official divide up ownership of the corporation by issuing stock to each shareholder. Colorado does not require that the shares be represented by certificates except where expressly required in C.R.S. §§ 7-106 through 7-117. If certificates are issued, the certificates must indicate on the face the name of the corporation and that it is incorporated in Colorado, name of the person whom the certificate is issued, number and class of shares issued and any designation of series, and the officers or board of directors authorized by the corporation must sign the certificate. If the issuing corporation is authorized to issue different classes of shares or different series within a class, the share certificate shall contain a summary, on the front or the back, of the designations, preferences, limitations, and relative rights applicable to each class, the variations in preferences, limitations, and rights determined for each series, and the authority of the board of directors to determine variations for future classes or series. Alternatively, each certificate may state conspicuously on its front or back that the corporation will furnish to the shareholder this information on request in writing and without charge.
8. File for Identification, Licenses and Permits. – The United States and the State of Colorado will be interested in your business and you will want to file for an EIN, Employer Identification Number or Federal Tax Identification Number. This can be issued through the filing of an IRS FORM SS-4 or through the website maintained by the IRS. You will also need to file your Colorado Business Registration, Form CR 0100, and then update your filing when you receive your EIN. You may also need to file for a sales tax license, unemployment insurance account and many municipalities throughout Colorado also require that a business file for a business license.

You may be ready to conduct business once you have created your corporation, completed the administrative tasks and obtained the necessary licenses and permits. Prior to beginning, you must understand how to protect the status of your new company. Many businesses make mistakes in the early phases of the businesses lifecycle with regards to operating procedures. These procedures get imbedded into the daily activities and are continued as the normal way of doing things. The problems arise when these processes erode at the legal separation between the members of the company and the company itself. If enough erosion is allowed to continue, the members may find themselves personally liable for the actions of the company.