A professional corporation is a business owned by a state-licensed worker, such as a dentist, lawyer, or hairdresser operating their own practice. Professional corporations are only available to those performing services that require them to be licensed by the state. If you have such a license, here’s how to form a Colorado professional corporation.
Choose the Right Structure
Colorado also allows you to file as a limited liability partnership (LLP) or professional limited liability corporation (PLLC). A PLLC also requires the primary owners to have a state license but has the structure of an LLC. A professional corporation is right for you if you wish to govern your company with a board of directors and issue stock.
Division of ownership
If you’re starting this business with other investors or partners, decide who owns how much of the company. This is often represented by awarding each person a set number of shares of stock.
Decide who will be responsible for making business decisions. Some companies prefer leaving this up to the board of directors. Which decision is right for you depends on how involved you want to get in the day-to-day running of your company.
Pick Your Name
A good name lets potential customers know who you are and what you do. The Secretary of State has several guidelines governing the naming of Colorado professional corporations. Consult the chart on the Colorado Secretary of State’s Business FAQs page to know if you must include a professional designator in your business name, such as “PLLC” or “PC.”
Along with including the appropriate designator, business names are governed by the following rules:
- Your business name may only include acceptable characters.
- You cannot name your business something which may mislead the public as to what you do. For example, you cannot use ‘legal’ or ‘law’ if you’re not a law firm.
- You cannot name your business something already in use. Search the Colorado state site to see if your business name is available. If it is, ZenBusiness provides a name reservation service.
Select Your Registered Agent
A registered agent is someone empowered to accept important documents, including legal notices, on behalf of your business. You may name yourself or a business partner the registered agent, but it isn’t mandatory. Doing it yourself can be a hassle because you can’t leave your office during standard business hours.
ZenBusiness offers a registered agent service that can make your life much simpler. We have access to a range of partners who can act as your registered agent, resulting in discretion and convenience.
Complete Your Filing
You must provide the following:
- Principal street address. In most cases, this is your practice’s physical address or office.
- The name and address of your registered agent.
- Purpose. Give your business’s purpose. “To provide the public with [x] service” is usually acceptable.
- Delayed effective date. This is optional. If you don’t choose this, then your filing will complete when the state approeves your filing.
- Vested legal title. Provide the name of the person with the vested legal title.
- Additional information. Depending on the nature of your state license, you may need to provide additional information.
- Individual causing delivery. This is the person behind the formation of the professional corporation. Usually, this is you, but it can also be ZenBusiness or another representative acting on your behalf. If you have business partners, include them under “additional individuals causing delivery.”
Next, pay the filing fee of $50 (online) and click “submit.”
Establish a Corporate Record
Colorado law requires your new company to keep a permanent record of all important records and minutes of meetings. You may keep this record at your place of business, but it’s best practice to keep a backup off-site. Consider using a cloud service to do so.
Designate Your Board of Directors
The board of directors for a professional corporation is responsible for guiding its growth and direction. The board of directors may be you and your business partners or investors.
Create Your Bylaws
After your board of directors forms, draft your corporate bylaws. These bylaws should outline the process to resolve disputes between members and assign corporate responsibilities to each officeholder. Good bylaws include the process for adding or removing people from the board of directors.
Hold Your First Board Meeting
At your first board meeting, review and ratify your corporate bylaws. Decide who is responsible for your company’s day-to-day operations, and to whom they answer. Conduct any other important business, such as selecting the bank for your company. Don’t forget to take the minutes of this meeting, and include them in your corporate record.
Handle Your Tax Obligations
One important element of your corporate record is your EIN, or Employer Identification Number. Similar to your personal Social Security Number, this is a unique designation your business will pay corporate taxes under. You can obtain your EIN at the IRS website. Or let ZenBusiness get an EIN for your professional corporation
In addition to federal taxes, ensure you’re complying with all state tax laws. In addition, check with your county and local governments to see if they require additional taxes.
Ensure Licensing Compliance
Some businesses face extra regulation from state licensing boards. You are responsible for ensuring your business and its employees have all necessary, up-to-date licenses. ZenBusiness can help with its business license report.
Don’t forget to acquire the proper type of insurance for your business. You’ll want general liability insurance along with any sort of malpractice insurance mandated by your profession. If you plan to hire employees, don’t forget workers’ compensation — this is required by the state of Colorado.
Open a Business Bank Account
To protect your personal assets, keep your company’s money in a separate account. Shop around locally for the bank which best meets your needs. When you set up this account, carefully designate who has the authority to access it.
Creating a professional corporation in Colorado is a way to take advantage of the favorable business structure and enhanced protections this brings. It can be extremely rewarding, and if you want the easiest way to set up a Colorado PC, talk to ZenBusiness today.
Colorado Professional Corporation FAQ
What are the filing fees for a Colorado professional corporation?
The current filing fee is $50, payable by credit card.
Do I need a lawyer to form a Colorado professional corporation?
You may file on your own if you are one of the professions specifically listed as requiring state licensure. If you’re forming a practice in which you will be the sole owner, you probably don’t need a lawyer. If you are entering into a partnership with others, consider hiring a lawyer to help you draft the proper documents.
Does Colorado have other professional entity types?
Yes. Colorado also allows people to form professional limited liability corporations and professional limited liability partnerships. They are one of the few states that offer all three business types.
Can professionals from different fields form a Colorado professional corporation together?
Theoretically, yes. However, you should definitely retain the services of an experienced lawyer to ensure all your paperwork is properly prepared.
Will I be taxed as an S corporation or C corporation in Colorado?
Your tax bill depends on if you’re approved as an S Corporation. An S corporation must have 100 or fewer shareholders and issue only one class of stock. The company cannot be owned by another business entity and cannot have any foreign investors. If your professional corporation qualifies, you may use Colorado’s pass-through laws to be taxed as an S-corp. Otherwise, you are a C corporation. C corporations must pay taxes on profits at the corporate level, and your personal income from the corporation is also taxed. If you are unsure how to file your taxes, consult a tax law attorney.