Sun 04 Oct 2015 | By:

Pros and Cons to Starting a Colorado Corporation

Pros and Cons to Forming a Corporation

Starting a Corporation in Colorado is a great way to start your business. It’s one of the best business structures that you can choose for your Colorado startup because it can give you and your business maximum protection and advantages.

By forming a Corporation, your business is subject to certain rights and privileges. For example, it will have the right to due process and protection, the right to seek legal counsel, freedom of speech and right against self-incrimination.

We will present a few advantages related to incorporating. Hopefully weighing the pros and cons will help you to make an informed decision as a you move forward with your new business.

Pros to Starting a Corporation in Colorado

1) Shield Against Liability

Regardless of the type of liability: personal, legal or financial, if you incorporate as a Corporation, you will be given immunity in the case of a lawsuit, since your Colorado Corporation is considered a separate entity.

If your business were to be sued, you will not be subject to legal repercussions, as you are in no way accountable for your business. Also, creditors would be unable to come after your personal assets and reputation, as they are protected by the state law of Colorado.

2) Business Stability

There’s a chance that a business can outlive its founders, which is why you need to form a Corporation. In the event of a death of one of the owners/founders or the selling of stocks or transfer of shares takes place,  your business will continue operating.

The continuation of your business, or perpetual existence, literally means everlasting existence.  You can establish perpetual existence by starting a Corporation in Colorado.

3) Easy To Attract Investors

Before an investor can trust your company, they will want to know that it is legally registered before the state of Colorado. Unless you have an entity, investors won’t invest in your business venture.

Also, the ability of a Corporation to sell stocks is a strong selling point for many investors.  They will be more willing to invest money if you’re incorporated as a Colorado Corporation.

4) Improves Business Reputation

When you incorporate your corporation, your credibility as a company greatly increases. A business with an abbreviation of Co. after its name will improve its reputation.  Customers will trust you more readily, because they know that they are dealing with a legitimate business that is recognized by the state to operate in Colorado.

5) Management Structure Is Organized

A Corporation’s management structure is highly organized compared to other forms of business structure. There’s a clear line of command passed from directors, officers and shareholders. Every position in a Colorado Corporation has a well-defined business structure, so everyone knows their job and responsibilities.


Cons to Forming a Colorado Corporation

1) Expensive

Just like any other government process, forming a Corporation can be expensive. You need to prepare enough money to pay for government filing fees and charges so you can complete the incorporation process smoothly.

2) Time-consuming

Aside from being costly, incorporating your Colorado startup as a corporation can also be time-consuming. You have to prepare documents for filing, walk through every step,and wait patiently for the process to be complete.

3) Heavy Tax Liability

Since your Colorado small business is an independent entity, it needs to have its own tax return. Additionally, it is also subject to double taxation.  Consult you accountant to potentially avoid double taxation.

The Corporation tax code is also quite complicated, so you may need to consult professional assistance every year to assist you in taking care of your Colorado taxes. (note: this is not legal advice)

4) Subject To Strict Government Regulations

The state of Colorado imposes strict government regulations on corporations. From tax regulation to environmental compliance, the government will have its eye on your Colorado Corporation.  Due to government regulations, you may be forced to make decisions that other business owners of different business structures don’t usually make.

5) Numerous Corporate Formalities To Follow

To fully establish your startup as a separate entity, you need to follow measures to make it known to the state government.

First, you must open a business bank account. Second, you must observe numerous corporate formalities, such as: regular director meetings, keeping corporate activity records, and employee meetings/conferences.

Every business structure has its own set of pros and cons. However, if you look into the advantages of forming a Colorado Corporation, it’s crystal clear that its benefits are greater than its downside. At the end of the day, the decision is up to you.  If you need to consider another business structure, consider starting a Colorado LLC.

After you’ve read this article, I hope you’re now ready to learn how to start a Corporation in Colorado and kickstart the process. Please not that this is not legal advice and speaking with a local professional is recommended. Good luck!

About Ryan James

Half hardworking hermit, half avid adventurer, Ryan founded Startup Savant to simplify entrepreneurship and pay it forward by donating a portion of all revenue to support children's education via