You are here: Ask Jim -November 2011

November 2011

Dear Jim, I want to open a social network site but with some different features, not like Facebook. My question is, how am I going to get the funding and some programmers. I will like to outsource the programming part, as it is cheaper in the countries like India. I will require some experienced person form the social network world with whom I can share some revenue. Last but very important question, how many dollars will I have to spend on this site form my side? or can I loan my share form any financier?

   The questions you have asked here are good ones. They require long and well-researched answers and that is the purpose of doing a business plan. The Denver Metro Small Business Development Center has both short (Business Plan Basics) and long (NxLevel) classes which can give you what you need to know in order to do this. In addition, we have several consultants who specialize in Internet based businesses and planning. The consulting is free, unlimited and confidential. Just go to this web site to register for consulting and/or classes: www.denversbdc.org.

 Regarding your questions about financing, those are the kinds of things that would also be answered by doing the business plan. I can tell you that lenders are very reluctant to loan to startup software companies and that usually that kind of funding is found through investors.

Dear Jim, I am about to join a photography business to help with marketing, scheduling and correspondance. I'm also coming on to help with the legal side of things, licenses, taxes etc. The owner says he has a temporary license from Denver, and has been doing photography in Denver and Chicago. Will the license he had in Denver cover both cities? Or should he get a seondary license for Chicago? With me coming on board, should we create an LLC as well or a sole propriertorship? Also, if he is going to be photographing in both cities, we have to claim taxes in both cities as well correct? Can you tell me how I would go about doing that?

  I am not sure what a “temporary license from Denver” would be. I have never heard of that before. But I can tell you that it will not be good in Chicago. Every governmental unit has its own requirements for registering a business even within the same State. Normally if you maintain a physical presence within that location (such as an office), you must be separately licensed within that town, city, state, etc.

  Secondly, if you are also an owner of the business, it cannot be a sole proprietorship. Sole means sole, i.e., only one owner. You can choose to be a traditional partnership, a multi-member LLC or a corporation of one type or another. The SBDC has regular classes on Startup Basics which can give you the information needed to make that decision. Or you can schedule a meeting with one of our consultants for that advice. But it is an important decision and you should make it knowing all the facts.

  Finally, yes, you will have to pay taxes in both cities (states) where you earn income. If your residence is in Colorado, the State will give you a credit on your return for the taxes paid in Illinois. You can get the appropriate tax return forms online at the department of revenue web sites for each state. Or you can have a professional do your taxes for you and the business.

 Dear Jim, I'm a professional photographer in Albuquerque, NM. My husband and I are moving to Colorado. I still am going to stay a business in Albuquerque since I have photo sessions booked into 2012 with my business here. I have set up as a foreign Entity with the Secretary of State and applied for my True Name. I've also filled out the CR0100 Form and am mailing it to the CO Dept of Revenue today to get my Sales Tax Licenses. So, my question is do I need to register my business with the city of Denver? I do plan on working throughout Colorado and the different cities close to Denver (like Littleton...) and just want to have all my bases covered before I officially begin business in CO.

   It sounds as if you done almost everything you need to do for the move to Colorado. But, yes, there are some things you need to do for the City of Denver if your base of operations is going to be inside city limits.

   Although Denver does require the registration of certain specific businesses, photography is not one of those businesses. However, there are some taxing requirements you will have to register for. One of these is the Occupational Privilege Tax. This is required of all employers with the city, including those who are self-employed. The tax is $4.00 per month.

  Secondly, Denver collects its own sales taxes. Although services are not generally subject to sales tax, if you sell anything that is delivered on electronic media or any other tangible products (such as a photo album), you must register for and collect sales tax.

  You can get help with both of these by contacting the Denver Business Assistance Center at 201 West Colfax Avenue or by calling 720-913-1715.

   Finally, Colorado has a complex sales tax system which is determined by “point of delivery.” There are many levels of sales tax collected by many different entities around the State. If you are doing business in other locations, you may be subject to one or more local sales taxes. Each one of these entities should be checked individually to determine whether or not you are liable for collecting the sales tax.