Choice of Entity

Starting a new business? One of the first things you will need to do is decide on what type of entity you'll set up - sole proprietorship, corporation, partnership, limited liability company or another type. Sole proprietorships have the benefit of simplicity - there are no legal forms to file in Colorado and they do not require a separate income tax return. However, they can be more expensive in self-employment taxes and don't offer as much liability protection for the owner. Corporations and partnerships are a little more difficult to set up, as the state requires documents be filed and it is generally best practice to have an attorney draft an operating agreement. However, they offer the benefit of having more than one owner split the profits and additional liability protection for the owners. LLC's can offer the best of both worlds in some situations. It's best to chat with your attorney and CPA to determine which entity type will serve you best now and in the future.