Financial Guide to Starting a Small BusinesS - Start Smart Series Part 1 : Before You File
Starting a small business is exciting — but also full of decisions that can shape your financial future for years. Every form you file, every account you open, and every dollar you spend in the first few months will ripple through your tax returns, books, and even your personal liability.
This first article in our Start Smart series walks you through the five key financial decisions to make before you register your business — so you can launch with clarity, confidence, and fewer surprises down the road.
1. Choose Your Business Structure Intelligently
Your business structure determines how you pay taxes, how profits are distributed, and how much personal risk you carry. We’ll go into more detail on each in Part 2 of the series.
Sole Proprietorship: simplest, but no legal separation between you and the business.
LLC: adds liability protection and flexible tax options.
S-Corp Election: potential self-employment tax savings once you earn consistent profit.
Partnership or Corporation: useful when ownership is shared or you plan to raise capital.
Colorado tip: Most small businesses register an LLC through the Colorado Secretary of State in minutes. You’ll receive a Colorado ID number used for taxes, banking, and licensing. Outside Colorado? Every state has its own filing portal — and we can help you navigate yours.
2. Secure Your Federal & State Tax IDs
Your EIN (Employer Identification Number) is your business’s Social Security Number — you’ll need it for banking, payroll, and tax filings.
Federal EIN: Free through IRS.gov.
Colorado Account Numbers: Once registered, apply through the Colorado Department of Revenue for sales tax, wage withholding, and FAMLI program registration.
Missing one of these steps early often causes delays opening accounts or filing returns. We make sure every registration is complete and correctly linked before your first dollar hits the bank.
3. Open a Dedicated Business Bank Account
Mixing business and personal funds is one of the most common — and costly — startup mistakes.
Keep business income and expenses separate from day one.
Use a debit card or credit card linked only to your business account.
Deposit startup contributions formally, labeling them as owner investment or loan to business.
Why it matters: Clear separation preserves your legal protection and makes bookkeeping far easier. Colorado note: Some state programs require a business bank account for reimbursement or credit eligibility (e.g., small-business grant programs).
4. Set Up Accounting & Recordkeeping Before You Earn a Dime
A well-structured bookkeeping system helps you see your financial picture and stay IRS-ready.
Choose a system such as QuickBooks Online. (Hiatt Accounting Group can save you 75% on your first 3 months.)
Create a chart of accounts aligned with your industry.
Track startup costs, mileage, and home-office expenses separately.
Store receipts digitally — the IRS now accepts scanned records.
Colorado focus: If you plan to collect sales tax, you’ll need accurate records of taxable vs. non-taxable transactions.
Setting up these systems right away saves hours — and headaches — at tax time.
5. Understand Your Early-Stage Tax Responsibilities
Even if you’re not profitable yet, certain taxes can still apply.
Estimated Taxes: Most new business owners must pay quarterly to avoid penalties.
Sales Tax: Colorado’s state rate is 2.9%, but local rates vary. The state’s Sales Tax System (STS) combines filings for most jurisdictions.
Payroll Tax & FAMLI: If you hire employees or pay yourself through payroll, register for both Colorado Withholding and FAMLI contributions.
Outside Colorado? Each state’s tax agencies handle registration differently — but the same rule applies: handle taxes early, before the first invoice goes out.
Avoiding the “Fix It Later” Trap
Many new owners push off accounting setup until the business “gets bigger.” That approach can lead to:
Missed deductions
Late filings and penalties
Costly rework when converting from personal to business accounts
Building structure early is simpler — and almost always less expensive — than fixing it after the fact.
Your Pre-Registration Checklist
Before you officially file your business, confirm you’ve:
Chosen a business structure and understood its tax impact.
Registered for a Federal EIN and State tax accounts.
Opened a separate business bank account.
Selected an accounting platform and set up basic recordkeeping.
Reviewed estimated, sales, and payroll tax requirements.
Next in the Series
Part 2 – Choosing a Business Structure: How Entity Type Impacts Your Taxes, We’ll compare LLCs, S-Corps, Sole Props, and Partnerships — explaining how each affects taxation, liability, and long-term growth.
Starting smart means starting informed. At Hiatt Accounting Group, we help entrepreneurs in Colorado —and across the U.S.—plan their structure, register correctly, and build a solid financial foundation. Schedule your startup planning consultation today, and make sure every decision you make today pays off tomorrow.
Call or text us: (720) 595-9473
Email: ahiatt@hiattaccountinggroup.com
Visit: www.hiattaccountinggroup.com
