Building a solid foundation for your business begins with choosing the right legal structure to protect your interests and further your goals. The crucial concerns of personal liability, taxation, and overall business operation depend on your choice of business structure. At The Law Office of Poorvi B. Parkhie, we apply over 20 years of experience in business, corporate, and finance law to help Colorado businesses, entrepreneurs, and startups make an informed choice and take the right steps to establish the business structure. We also proactively partner with our clients to make certain they are aware of all the key legal aspects that pertain to businesses in the state.
For Colorado businesses of all sizes in any industry and market, Denver-based business attorney Poorvi B. Parkhie offers dependable legal support that is easy to understand and free of stress. Her extensive business law experience enables Poorvi to work efficiently and provide exceptional quality services at a reasonable rate. She provides straightforward, honest advice in a timely manner to help her clients succeed and grow throughout the lifecycle of their businesses.
Available legal structures for a Colorado business generally fall into four categories: sole proprietorship, partnership, limited liability company / LLC, and corporation. Other specialized types of legal structures are also available. Each type of structure has its own benefits and responsibilities. The key differences relating to personal liability, taxes, and business operational requirements for the four primary structure types are as follows.
A single-owner for-profit business is a sole proprietorship by default if the owner does not establish a different legal structure. The owner has full management control and personal liability for the debts and obligations of the business. Revenue and expenses are reported on the owner’s individual income tax return. There are no filing requirements for a sole proprietorship but business name registration may be advisable.
A partnership is the simplest structure for a business owned by two or more people. In a general partnership, all partners have equal control and ownership, unless a partnership agreement provides otherwise. Each partner is personally liable for business liabilities, debts, and obligations. Business income and losses are reported on each partner’s individual income tax return. Colorado has no filing requirements for a general partnership.
Colorado recognizes several types of limited partnerships, which can only be created by filing the appropriate documentation with the Secretary of State, including:
In addition to state filing requirements for the special types of partnerships, a partnership agreement and business name registration are advisable for any partnership.
A limited liability company or LLC combines aspects of other types of business structures and is a common choice for entrepreneurs and small businesses. LLCs are subject to specific Colorado statutes. State registration is required. Business name registration may also be advisable.
The LLC is a legal entity separate from the ownership. Owners of an LLC, who are referred to as members, have limited personal liability for the debts and obligations of the business.
A multi-member LLC is taxed as a partnership. Members of an LLC (including single-member LLCs) report their share of LLC income on their individual tax returns. Certain LLCs may elect to be taxed as an S-corporation.
A corporation is a distinct legal entity separate from the ownership (shareholders). The structure provides an organizational separation between ownership and management, so that shareholders have personal liability protection from debts, obligations, and acts of the corporation.
Formation of a corporation has more extensive documentation and filing requirements than other types of business structures, as well as requirements to follow specific formalities in managing and operating the corporation. A C-corporation is taxed as an entity, and shareholders are taxed personally on their share of corporate income (dividends), which is referred to as double taxation, since the same income is taxed at the corporate and personal levels. Corporations that meet specific requirements may elect to be taxed as an S-corporation to avoid double taxation.
When you work with us to create the legal infrastructure for your business, we carefully explain all the legal implications for choosing among the available types of legal structure and guide you through making a fully informed decision. We then help you navigate the requirements for establishing the chosen structure. The legal support we provide includes drafting the necessary documentation, reviewing each document in detail with you, and filing documents when required, such as:
As part of the business formation process, we help with business name selection and registration and provide you with a customized roadmap to keeping your business healthy in the future, by ensuring that you are familiar with applicable state laws and local regulations covering everything from licensing and zoning to employment laws and environmental regulations. For business owners interested in obtaining legal protection for a business or product name and logo, we offer trademark advice and registration.
We do not view business formation as a one-and-done endeavor but as the beginning of a partnership dedicated to helping your business thrive and shine. Going forward, we stand ready to help with any legal needs that arise during your business operations, regardless of what the matter entails. The Law Office of Poorvi B. Parkhie serves as outside general counsel for many businesses that do not need full-time in-house legal counsel but do need a trusted lawyer by their side.
Check out our Blog and our Guide for Small Businesses in Colorado to learn more about how we can help your business succeed and grow.
We invite you to use our online contact form to schedule a free 30-minute virtual or phone consultation to talk about how we can help you start your business on sound legal footing.
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