How To Start A Mental Health Practice In Colorado

1. Local Zoning Laws and Regulations in Colorado

Colorado has 64 counties and 272 active municipalities. If you plan to set up your therapy practice in Colorado, you must ensure that the local zoning laws allow you to operate there, even if it is your own home. If the zoning laws do not permit you to operate a business in a particular area, you can apply for a zoning variance, which is an exception to the zoning laws. To determine whether you need to apply for a variance, what types of zoning your town or city recognizes, and what kind of business you can perform there, you can refer to the relevant local government website.

2. Business Name Search in Colorado

To register a trade name for your therapy practice in Colorado, you need to complete and file a statement of Trade Name form with the Secretary of State. Before filing the form, you should conduct a name search to ensure that your chosen name is not already taken. You can file the Statement of Trade Name by filling out the appropriate form based on your business structure, which is available on the Secretary of State’s website. The fee for registering a trade name in Colorado is $20. If you operate your therapy practice as a sole proprietorship and use your own name, you do not need to register a business name. However, if you want to use a name different from your own or switch to a different business structure, such as an LLC, you will need to register an assumed name.

3. Business Structure in Colorado

To choose a business structure recognized by the State of Colorado, you need to understand the different entity types recognized by the state. The business structure you choose will affect how your practice’s income is taxed and who may own shares of the practice. In Colorado, you can choose from a variety of business structures, including sole proprietorship, general partnership, LLC, PLLC, corporation, LP, LLP, LLLP, limited partnership association, nonprofit organization, and cooperative. However, before settling on a business structure, it is important to talk to your accountant and, if necessary, a lawyer to help you choose the right one. Each state recognizes and registers different business structures, so it is important to understand the options available in your state.

By default, when you start a business on your own, you are considered a sole proprietor. In this business structure, you and your business are treated as one entity. This means that any profits or losses that your business incurs are considered your personal income or expenses. While a sole proprietorship is the simplest form of business structure, it does not provide any legal or financial protection.

A general partnership is a business structure in which all partners share equal liability for the company’s legal and financial obligations.

The LLC business structure is similar to a corporation in terms of liability protection but offers flexibility in terms of tax options. It allows for the election of tax status as either an S corporation or a partnership.

The PLLC business structure is identical to the LLC, except that all members must be licensed professionals and provide proof of certification. This structure provides additional liability protection for members in case of legal proceedings.

A corporation is a separate legal entity from its shareholders, who own shares in the company. There are two types of corporations: C corporations and S corporations. C corporations are taxed separately from the shareholders, while S corporations pass on the tax liability to each shareholder.

A limited partnership offers limited liability protection for some members. At least one person acts as a general partner who is personally liable for the partnership’s debts and legal obligations, while at least one person acts as a limited partner and is only liable for their share of the partnership.

An LLP is similar to a general partnership but provides extra protection against professional negligence. Any licensed professional may form an LLP, and the structure protects each partner against the outcomes of the other partners’ negligence.

The LLLP business structure is similar to an LLP but is available to existing limited partnerships.

A limited partnership association is a new business structure in Colorado that has an indefinite life, unlike a typical partnership that dissolves when a partner leaves or dies. The structure only dissolves when all members vote to dissolve it.

A cooperative is a legal organization made up of individuals or businesses working together toward a common goal. All members have an equal say in how the cooperative is run, and the focus is not on making a profit but on covering costs. The cooperative structure is meant for multiple individuals and businesses working together to pool resources.

4. Register Your Business in Colorado

MyBizColorado online portal is the most convenient way to launch your business practice in Colorado. It guides you step by step and collects information about your business, helping you file articles of formation for your chosen business structure and obtain any necessary licenses or permits. It consolidates information from five state agencies, including the Secretary of State, Department of Revenue, Department of Labor and Employment, Department of Regulatory Agencies, and Office of Economic Development. The portal provides step-by-step instructions for each business structure. For instance, to form a sole proprietorship in Colorado, you need to register your trade name with the Secretary of State if you are doing business under a name other than your own legal name. There are no additional steps to form a sole proprietorship in Colorado, beyond reporting your self-employment income from your business.

To establish a corporation in Colorado, you must pay a $100 fee to file articles of incorporation. Firstly, select a name and register any additional trade names. Then, appoint a registered agent who must be at least 18 years old and have an address within the state. This person will be responsible for receiving all official communications from the State. Next, log in to MyBizColorado and follow the onscreen instructions to register your company with the Secretary of State and file the articles of incorporation. Be sure to carefully review any correspondence you receive from State agencies and respond as necessary.

To register a limited partnership in Colorado, you need to pay a $110 fee to file a certificate of limited partnership. Like incorporating, you need to choose a name, appoint a registered agent, log into MyBizColorado, and follow the onscreen instructions. Additionally, draft a partnership agreement, which is not mandatory by law but can help you stay organized and resolve any disputes between partners.

If you want to register a Limited Liability Partnership (LLP) in Colorado, you must pay a $35 fee to register up to two partners, with an additional $3.00 for each extra partner. However, note that an LLP is a status elected by a general partnership, and you must already have formed a general partnership before electing LLP status. Choose a name, register any additional trade names, appoint a registered agent, and file a Limited Liability Partnership Registration with the Secretary of State through MyBizColorado. Lastly, drafting a partnership agreement is recommended but not compulsory.

To register a Limited Liability Limited Partnership (LLLP) in Colorado, you need to follow these steps:

• Make sure you have already formed a limited partnership before electing LLLP status.
• Choose a name for your LLLP and register additional trade names if needed.
• Appoint a registered agent who is at least 18 years old and has a physical address in Colorado to receive official communications from the State.
• Log into MyBizColorado and follow the onscreen instructions to file a Limited Liability Limited Partnership Registration with the Secretary of State, as well as a certificate of formation. The filing fee for this is $110.
• Review any correspondence you receive from State agencies carefully and respond as needed.
• Consider drafting a partnership agreement to help you stay organized and resolve any disagreements between partners.To register a Limited Partnership Association in Colorado, follow these steps:
• Choose a name for your association and register additional trade names if necessary.
• Appoint a registered agent who meets the same requirements as for LLLP.
• Log into MyBizColorado and follow the onscreen instructions to register your association with the Secretary of State.
• Review any correspondence you receive from State agencies carefully and respond as needed.
• Consider drafting a partnership agreement to help you stay organized and resolve any disagreements between partners. Note that this is not a legal requirement.

5. Business Licenses & Permits in Colorado

In order to conduct therapy practice in Colorado, obtaining a business license is mandatory. Additionally, depending on the location of your practice, you may require further permits and licenses. To obtain a comprehensive list of all the essential permits and apply for them electronically, you can use the Business License Wizard.

6. Business Insurance in Colorado

It is highly recommended for therapy practices operating in Colorado obtain the following types of business insurance:

•       General liability insurance
•       Commercial property insurance
•       Business income insurance
•       Professional liability insurance
•       Colorado worker’s compensation insurance

When shopping for insurance, consider looking for a business owner’s policy (BOP), which generally includes general liability, commercial property, and business income coverage.

Commercial general liability insurance protects against damages caused to someone else’s property or person, while commercial property insurance protects owned property such as computers and office furniture, as well as the building where the practice operates.

Business income insurance covers loss of income due to events such as natural disasters or theft. Professional liability insurance covers lawsuits due to libel, slander, mishandling patient records, or providing inaccurate advice.

If the practice has employees, it is mandatory to have Colorado worker’s compensation insurance to protect them from workplace injuries or illnesses.

7. Business Taxes in Colorado

All businesses earning income in Colorado are obligated to pay state taxes. If the tax amount exceeds $1,000, it must be paid in quarterly installments.

If you’re relocating your therapy practice from another state to Colorado or planning to move your practice out of Colorado to another state, you’ll have to determine how to pay taxes in multiple states. The regulations differ depending on the states in which you operate throughout the year and the duration of your business activities in each state.