Legal Question in Business Law in Colorado

Re: Is it legal to incoporate?

I practice law in California only. You need an answer from a Colorado attorney regarding the legality of using a Colorado corporation for the sole purpose of holding stock, but that would be legal in most states unless the purpose was to avoid the lack of registration (of the stock bought) for sale to residents of California. That could be a violation of securities laws, but would only be a concern with stocks that weren't traded on a national exchange.

A better question is whether this makes any business or economic sense. There will be costs and paperwork in setting up and maintaining a Colorado corporation. You will need a brokerage account in its name, and it will probably be asked to execute a power of attorney to authorize you to initiate trades on its behalf.

Further, your dividends and capital gains may be subject to double or triple taxation (Colorado, California and twice by Uncle Sam).

So, whether it's legal or not, the practical reason for doing so escapes me. Holding your assets personally should be just as effective; any lenders or property owners you later contact

will be interested in your personal net worth almost as much as that of any holding company you control.

There are some valid reasons for using a separate entity for an operating business, such as privacy and risk limitation, but your question doesn't suggest these motives, and so long as you'd be using the proposed Colorado corporation solely to hold publicly-traded securities, the advantages, if any, seem to be outweighed by the disadvantages.

Re: Is it legal to incoporate?

I don't see why not. Corporation can exist for "any lawful business purpose." Limited liability companies are more flexible - they can exist for any lawful purpose- doesn't have to be business related. You might think about an LLC for that reason, rather than a corp.