How do you prepare colloidal chitin from chitin flakes?

Chitin is something that is synthesized naturally in arthropods (crustaceans, insects, etc.) and fungi. So, it doesn't have to be created in a lab...it's much easier to harvest it from existing biological sources.

Once harvested, you separated it out from exoskeleton material (such as from shrimp, etc.).

However, if you wanted to synthesize it, you polymerize D-glucosamine with beta linkages into the polymer chitosan. Then, you acetylate that (add acetyl groups) to the nitrogen atoms of the amino group on the D-glucosamine subunits, and you have N-acetyl-D-glucosamine polymer, also known as chitin.