Create a business plan. Write up a plan for your business that includes a schedule, start-up costs and a plan for the future. This will prove helpful in creating a successful business.
Decide upon a name for your business. If you plan to do business under any other name than your own, as listed on your tax return, you must register a Colorado trade name. You do not need to register a trade name if you plan to do business only with your own name. Go to the Colorado Secretary of State website, sos.state.co.us, to find the correct Trade Name forms. Click on the "Business Organizations" tab on the left. Click on the "File a Document" link. You will need to create a new record. Select the link "File a form to create a NEW record." Find and select the "Register a Trade Name" link. Select the "Individual (Sole Proprietor)" form. Fill in your name, address, trade name, brief description, and other business information. Submit the completed form. Pay the $20 fee to complete your transaction. You will receive an email confirmation with an ID number for your document. Print all documents for your records.
Complete W-9 forms every time you begin a new contract. Since you are self-employed in Colorado, your employers will not withhold state or federal income taxes. The W-9 will list all income earned, and it will be used to report your taxable income.
Collect receipts for business expenses throughout the year. You can itemize expenses on Form 1040, that are "ordinary and necessary," according to the IRS. Request the IRS Publication 535 to research applicable expenses, such as transportation, rent, cost of goods sold and more.
File your taxes as a sole proprietor. Unlike larger organizations, you do not have to fill out extra forms. You will need to declare your business income on the federal Form 1040, Schedule C or Schedule C-EZ forms. The amount you fill in on your federal tax return will be used on the Form 104 of your Colorado income tax return.
Pay the 15.3 percent self-employment tax on your federal tax return. This is listed on Schedule C of your tax return. Instead of paying social security tax directly, sole proprietors must contribute this tax for federal social security and Medicare programs. Part of the self-employment tax is deductible. Half of the 13.3 percent self-employment tax, or 6.65 percent of your income can be deducted from your gross income in order to calculate your adjusted gross income. Only the first $106,800 of your income is subject to the federal self-employment tax.
Renew your trade name every year. You can go to the Secretary of State website within the 3 months before it expires to renew. The cost of renewal is $5.
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