Discover how to start a general partnership in Colorado’s dynamic business scene. Explore our guide below for essential insights on successfully navigating the partnership formation process in the Centennial State.
When you and your co-owners agree to start a Colorado business and share profits, you’ve formed a general partnership in Colorado. Colorado doesn’t have general partnership registration. A general partnership requires all partners to engage in running the business.
Most importantly, the partners share equally in profits and losses. Follow our steps below to form a Colorado general partnership.
A general partnership has many advantages, but it may not be the best form for your new business. We’ll review some of the main benefits and drawbacks of starting your business as a partnership in Colorado below to help you decide.
Forming a partnership is a popular way to start a business. It can be beneficial for the following reasons:
The partnership structure is most suitable for short-term commercial projects. On the other hand, if you want your business to be long-term and leave a legacy, it’s more complicated to transfer ownership of the partnership when compared with other structures. Finally, under Colorado law, partnerships typically dissolve when one of the partners dies or the partnership enters bankruptcy.
While forming a partnership is easy, your business needs might not fit the partnership structure. Here are some limitations you need to be aware of:
Before making any binding decisions to start a partnership, it’s a good idea to consult with your legal and financial specialists. Only a professional can evaluate whether forming a partnership will meet your business goals.
By default, the state recognizes a partnership by the last names of its partners. For example, if your last name is DuBois and your co-owner’s name is Smith, your true business name could be “DuBois and Smith.” There’s no requirement for a partnership to register with the state unless you use a name that doesn’t contain the partners’ names. In that case, your business will need to file a trade name.
If your partnership does business under a name that doesn’t include the partners’ names, you need to file a trade name. A trade name is sometimes called a “doing business as,” “DBA,” or “assumed” name. Filing a trade name creates an official record that others can search to identify the business.
To register, you’ll submit a Statement of Trade Name form to the Colorado Secretary of State. A general partnership’s trade name expires in one year, and you must renew. If you don’t renew, you’ll have to file a new trade name to reinstate your DBA name registration. We offer a DBA Name Registration Service for Colorado businesses to help save you time.
One of the most important documents you’ll need when starting a partnership is a Colorado general partnership agreement. The partnership agreement governs the relationship between the partners and the partnership. It explains how the partners will make decisions about the affairs of the business and the conduct of its operations.
Each partner has a legal duty to comply with the rules in the partnership agreement. If you don’t make a partnership agreement, conflicts between owners will be resolved using the defaults in the law.
While you don’t need to register as a general partnership in Colorado, you may need to apply for federal, state, county, and local government licensing and permits. The licenses you need will depend on the type of business you will be conducting. For example, a retail business needs to apply for a sales tax license. The Colorado Department of Regulatory Agencies (DORA) issues licenses at the state level. You’ll want to check with the local city or county offices where your business is located for other licenses that you might need.
Searching for all the different permits you might need can be time-consuming. We’ve partnered with Avalara to offer a Business License Report that will conveniently list the licenses you need for your business.
The IRS issues EINs to new businesses. Your business will need an EIN to pay federal taxes and withhold employment taxes for your employees. An EIN is a unique business identifier that you list on your tax returns each year. While registering for an EIN isn’t complicated, it’s another piece of paperwork you need to complete before legally operating your business. Fortunately, we can handle the filing for you with our Employer ID Number Service.
The Colorado Department of Revenue (DOR) manages state income taxes and employment tax withholding. You can register with DOR by filing a tax return or form CR 0100AP Colorado Sales Tax and Withholding Account Application. To create your online account, you can request a letter ID, which DOR will send to the address you registered with.
It’s a good idea to open a business bank account as soon as your partnership has the necessary state and federal tax accounts and numbers. To safeguard your investment, you will want to obtain one or more forms of insurance. Finally, don’t forget to check with your financial advisor to ensure that your general partnership in Colorado gets started on the right foot.
In most cases, forming a partnership in Colorado is straightforward. To maintain your general partnership’s legal requirements, you’ll most likely need to meet several licensing and tax registration criteria. Because of this, getting your partnership up and going might seem complicated and time-consuming at this point. Don’t be concerned! We can help you complete your legal tasks when you use our comprehensive range of business growth and maintenance services, including our Worry-Free Compliance Service.
While a general partnership is easy to start, it also has drawbacks. Our business experts created this page to explain how to form a general partnership in Colorado. The general partnership is just one of many business structures available for new business owners, and we can help you decide which structure will meet your goals.
You may find that a more formal structure than a general partnership will better meet your needs. Let our experts help you complete and file the correct paperwork using our Colorado LLC Formation Service or Colorado Corporation Formation Service.
Disclaimer: The content on this page is for information purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
No, Colorado doesn’t require general partnerships to register unless they use a name other than the partners’ names.
Colorado doesn’t tax general partnerships on their income, but it does require the partnership to file an informational Partnership and S Corporation Income Tax Return (DR 0106). Each resident partner will pay Colorado income taxes on their ownership share through their individual state returns. If any partners are nonresidents, the partnership may file a composite return that includes their portion of Colorado income taxes.
As owners of a general partnership, the state refers to you as co-owners or partners. The partners share equal responsibility for running the business and guaranteeing its liabilities and obligations.
A general partnership is operated equally by its partners. Each partner shares in the business’s operations and is equally responsible for the partnership’s dealings. When starting a partnership, the partners sign a partnership agreement that outlines how they will make decisions for the company.
In a general partnership, the partners have equal, unlimited legal responsibility for the debts and liabilities of the partnership.
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